Brexit problems, NFP in focus, vaccination date

4 Sep 2020

The dollar continued to recover yesterday in the foreign exchange market, but for the transition to a full-fledged correction, the Dollar Index needs to strengthen above 93.60. And for this, in turn, today's data on the US labor market should at least not disappoint. But this is doubtful. ADP figures were two times lower than forecasted, the number of jobless claims in August averaged around 1 million on initial applications and 14 million on continuous ones, a consistently weak component of the labor market in basic business activity indices, an increase in the number of bankruptcies - absolutely everything indicates that the US labor market continues to be in bad shape.

So, the expectations of an increase in the number of new jobs outside of agriculture by 1.4-1.5 million, in our opinion, is an overly optimistic estimate. Accordingly, we would not be in a hurry to buy the dollar today. On the contrary, the current dollar growth is a good opportunity for its sales. At least as long as the Dollar Index is below 93.60 and the NFP numbers come out weak enough.

Among other news, it is worth noting another unsuccessful week of negotiations between the EU and the UK. The EU's chief Brexit negotiator, Michel Barnier, said he was “worried and disappointed” with the UK's approach to the talks and said there was no progress. All of this is fueling fears that the UK will exit the bloc in January without a deal.

The US Centers for Disease Control and Prevention, meanwhile, notified states that they should be ready to distribute the vaccine by November 1. In their opinion, the chosen date is needed to ensure that the infrastructure is in place to distribute any treatment when it becomes available. As a reminder, none of the experimental vaccines have yet completed trials.

The US stock market yesterday showed the maximum decline since June. Possibly the bubble collapse process has begun.