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USD firms ahead of what is expected to be strong US jobs data - BBH

US dollar is firm ahead of the all-important NFP data, but is not going anywhere quickly as the lack of fresh interest rate support and uncertainty over the US tax proposals are not helping, explains the analysis team at BBH.  

Key Quotes

“Brady, the Chair of the House Ways and Means Committee, hopes to have a revised version out after the weekend so the committee work can begin on Monday.”  

“The popular press seems to focus on some objections by Democrats, but this misses the point.  The Republicans hope to pass tax reform without relying on Democrats.  It is the same strategy employed for health care reform, and the problem then and the challenge now is within the Republican Party and its constituencies.  A wing of the GOP wants no increase in the deficit and another wing wants lower taxes.  Immediately upon the release of the proposals, the National Federal of Independent Business objected that the bill will not help most small businesses.  The National Association of Realtor objected and home builder shares sold off yesterday.”  

“The focus in the US is on the monthly employment data.  The consensus calls for around a 300k increase.  We suspect the risk is on the upside.  That said, it probably requires more than 370k to excite the market, which realizes that the data is a payback from the loss of jobs due to weather in September.  Hourly earnings may have also been skewed from the storm.  A 0.2% rise (given the base effect) would see the year-over-year rate slow to 2.7% from 2.9%.  The average this year through August was 2.6%.  Other measures of labor compensation, like the recent Q3 Employment Cost Index, shows a modest acceleration.”


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