Talking Points:

• US economy seen adding 173k jobs in October, the most in 3 months
• On-trend jobs growth may boost December Fed rate hike probability
• Pre-election jitters may overshadow payrolls data for the US Dollar

Fed monetary policy expectations return to the spotlight at the end of the trading week as October’s US Employment report comes across the wires. A nonfarm payrolls gain of 173k is expected, marking a three-month high. The jobless rate is seen edging lower to 4.9 percent from 5 percent in September.

At surface level, a print in line with expectations would fall broadly in line with recent trends, which Fed policymakers have hinted is good enough to justify a rate hike in December. While this may boost the priced-in probability of tightening before year-end – now at 78 percent – the US Dollar may not capitalize.

The greenback has fallen for five consecutive days against its major counterparts despite a cautiously hawkish FOMC monetary policy announcement. The selloff seemed to reflect a narrowing of the polls ahead next week’s presidential election as markets reckoned with renewed uncertainty about the vote’s outcome.

This suggests that even a rosy jobs report may not be enough to breathe life into the US unit. Meanwhile, sensitivity to headline risk is likely to remain elevated. Developments seen as altering the outcome probability balance one way or another will almost certainly find a ready audience among USD traders.

The European docket is relatively quiet, with mostly second-tier news flow due to cross the wires. The last batch of October’s revised German and Eurozone PMI readings are as close as it gets to potent event risk, and even there significant follow-through is unlikely absent dramatic deviations from flash estimates. 

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