Markets Look For More Solid Footing, But Need To Get Passed US Jobs Data

America

The US employment report is front and center. The weekly jobless claims are increasingly difficult to read.  In part, a new seasonal adjustment is being used, but more importantly, going forward, the benefits are increasingly going to be exhausted. This will produce lower numbers of continuing claims but will not represent an improvement in the labor market. Note that the Pandemic Unemployment Assistance Program, which extends benefits to the self-employed and gig workers, increased its rolls by 152k to 759k last week. The median forecast in the Bloomberg survey stands at 1.35 mln for today's non-farm payrolls, down from 1.76 mln in July. The unemployment rate is expected to slip to 9.8%. Note that the seasonal adjustment factor was a net additive in recent months and, with today's report, become a net drag. Separately, we note that Fed officials, who now have entered the quiet period ahead of the September 15-16 FOMC meeting, appeared to have increased their calls for more fiscal support. However, talks between the White House and the House of Representatives seem to have gone nowhere. That said, an agreement between Mnuchin and Pelosi seeks to avoid a government shutdown in early October.  

Canada also reports August employment data. The median forecast in the Bloomberg survey calls for a 250k increase after a 418k rise in July. The unemployment rate was at 10.9% in July and may have fallen to 10.2% in August. The mix between full and part-time jobs may be important, but the market's response is often more about the reaction to the US data. Separately, note that today begins Mexico's pre-approval procedures for steel exports to the US. These were announced to avoid the lower quotas that the US has imposed some types of Brazilian steel and Canadian aluminum.  

The US dollar recovered to about CAD1.3160 in yesterday's surge. Recall that the greenback has traded briefly below CAD1.30 earlier this week for the first time since January. Yesterday's move stalled in front of the 20-day moving average (~CAD1.3175). The US dollar has not closed above since July 14. Initial support is seen near CAD1.3080, but yesterday's low was around CAD1.3040 is likely to be stronger. The sell-off in equities yesterday failed to deter the peso buying. The dollar fell for the third consecutive session against the peso and is heavier today. It is approaching the 200-day moving average (~MXN21.5180), which it has not traded below since March. The June low is in the MXN21.46-MXN21.47  area.  

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Read more by Marc on his site Marc to Market.

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