US jobs drastically under-counted? – The Washington Post ran an article suggesting that poor BLS data collection and other factors mean that over 625,000 US jobs were not counted for the June to September time frame. If this is the case and these revisions show up in the next jobs on top of strong new numbers for November, etc., we could be headed for a far more drastic Fed tightening than anticipated, with the December FOMC possibly bringing a doubling of the tapering rate and the market bringing forward the lift-off timing and pace of rate hikes.
USDJPY perched near 115.00 – have to watch the longer US treasury yields here, as well as oil prices, for the risk of further JPY weakness, as the JPY managed to weaken more or less as rapidly as the euro yesterday and USDJPY is near the massive psychological level of 115.00. Probably an un-moored US 10-year yield pulling above the 1.75% cycle high would be needed to sustain a major break higher for this pair and eventual attack on the 120.00 area. Note the US 20-year treasury auction late today.
Brainard or Powell? Get it over with already. This is still a significant point of uncertainty for the market and I am entirely unsure how the market will respond. Lael Brainard’s odds of getting the nod are rising and she is even favoured by bookmakers at this point, but how difficult would the confirmation hearings prove for her? As mentioned before, the path of Fed monetary policy would likely differ little whether Brainard or Powell is Fed Chair from February, while Brainard is a hawkish regulator and will likely be given a prominent new post as such even if Powell is offered a second term.
Table: FX Board of G10 and CNH trend evolution and strength
As noted above, the weak Euro and Swedish krona are the real standouts on the weak side, while sterling has posted a strong comeback from last Thursday’s BoE debacle on BoE comments and jobs data (note momentum readings). Interesting to see whether the USD shifts into a higher gear and overtakes both the even stronger CNH and gold if US long treasury yields see a breakout higher.