Daily Currency Update

USD - US Dollar

Today's U.S. employment data for November could be pivotal in influencing market speculation about a potential Federal Reserve policy easing in 2024. The anticipated payroll figure is around 183,000, but weaker signals from recent JOLTS job openings and ADP payrolls (though not directly predictive of official stats) hint at market anticipation for a lower number. Market consensus suggests a 180,000 increase. However, the U.S. job market might show greater resilience than anticipated, potentially leading to a reduction in dovish expectations for the Fed and bolstering the dollar. Additionally, the agenda includes the University of Michigan surveys for December, with the inflation expectation figures, expected to decrease, likely having a significant market impact. Overall, there seems to be a chance for the dollar to strengthen today.

CAD - Canadian Dollar

The Bank of Canada kept interest rates steady this week, noting reduced spending and faster-than-expected inflation decline, but didn't dismiss possible future hikes. While this was generally good news for CAD, external factors (US data in particular) remain much more relevant. From a market perspective, the reiteration of the hawkish bias by the Bank of Canada is positive news for CAD, although the acknowledgement of faster inflation decline and the strong impact of tight monetary conditions on the economy have offset the impact on the loonie. The loonie remains highly affected from a deterioration in US data. We continue to expect the worsening of US (as well as Canadian) growth over the coming months. Observe USD/CAD trends.

EUR - Euro

The EUR/USD pair rebounded due to a general dollar decline but remains weak in the G10. Today, it's under pressure, falling below 1.0800 despite some gains in other pro-cyclical currencies. Two points are key to the current EUR bearish trend. First, the dovish European Central Bank rate revision, a main driver, seems mostly factored in. Markets expect a March rate cut and about 135bp easing in a year, but without a stronger dovish ECB stance, further dovish bets may be risky. Second, even if rate expectations have bottomed, the short-term EUR-USD rate difference suggests a lower exchange rate. However, resilient risk sentiment has so far prevented a bigger EUR/USD drop. With no significant eurozone events and the ECB quiet before next week's meeting, EUR/USD could target 1.070 support soon, especially if US payrolls are strong.

GBP - British Pound

Today in the UK, the focus is on the Bank of England's inflation attitudes survey release. Our economics team anticipates, as mentioned in the BoE preview, that Governor Andrew Bailey will likely counter the expectations for a rate cut at the upcoming policy meeting. This stance is expected to support sterling's strength against other currencies. Consistent with our outlook on the dollar, we perceive potential declines for the GBP/USD pair, which might drop below the 1.2500 mark in the near future.