Currency markets await US jobs report amid political turmoil

By Brigid Riley and Greta Rosen Fondahn

TOKYO/LONDON (Reuters) -Major currencies remained on edge on Friday as markets awaited U.S. job data and digested a politically turbulent week, with French President Emmanuel Macron saying he would appoint a new prime minister in the coming days.

In the spotlight will be the U.S. non-farm payrolls report for November, due later in the day, as investors look to second-guess the pace of future Federal Reserve rate cuts.

“It’s almost as if we haven’t had a real update on the health of the state of the U.S. labour market for two months, given all the anomalies there had been in the October report,” said Fiona Cincotta, senior market analyst at City Index.

U.S. job growth slowed sharply in October, skewed by disruptions from hurricanes and strikes by aerospace factory and dock workers.

The dollar index, which measures the greenback against six other currencies, was up 0.07% at 105.79 on Friday after slipping towards a three-week low in the previous session.

Facing political turmoil on its own turf, the euro traded down at $1.0582 after rebounding on Thursday as French bonds stabilised.

Despite a volatile week, the euro was on track to post a second weekly gain versus the dollar, while it tracked weekly losses against both the Swiss franc and the pound.

In France, Macron met allies and parliament leaders on Thursday as he sought to swiftly appoint a new prime minister to replace Michel Barnier, who resigned a day after opposition lawmakers voted to oust his government.

For now, the European Central Bank is not expected to react to heightened political instability in Europe when it meets next week, with traders and economists fairly certain it will trim rates by 25 basis points on Dec. 12.

U.S. JOBS REPORT IN FOCUS

U.S. non-farm payrolls are expected to have increased by 200,000 last month, according to a Reuters survey, after rising by only 12,000 in October, the lowest since December 2020. The unemployment rate was forecast to rise to 4.2%.

Markets now see about a 72% chance that the Federal Reserve will deliver a 25-basis-point rate cut when it convenes on Dec. 17-18, up from 66.5% a week ago, CME’s FedWatch tool showed.

City Index’s Cincotta said this week’s indicators, including private payrolls, jobless claims and services sector activity, pointed to on-target payrolls.

“If we see an on-target non-farm payroll report, then I think that will support confirmation that the Federal Reserve will be cutting interest rates in the December meeting.”

A stronger report could instead turn the attention to next week’s U.S. inflation data, Cincotta added.

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