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Weekly Currency Thought: US, Good momentum and optimism returning

33 SOLDI

As Obama and Romney make their closing remarks ahead of the US election, the world’s largest economy received a boost from American employers adding 171,000 jobs in October. The latest US non‐farm payrolls were much better than expected and came in well above consensus (125k) forecasts…….

 


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             This stronger than expected report plus net revisions to the previous two monthly reports is consistent with stronger labour market momentum heading into Q4. We would not be surprised to see some temporary volatility in upcoming jobless claims and payrolls data as a result of the devastatine Hurricane Sandy.

            However, we do not see the momentum in hiring and decline in the unemployment rate in recent months as changing the calculus for the Fed at this stage.

            The Fed desires both a substantial and sustainable improvement in labor market conditions and is likely to read recent payroll growth as a positive step in the right direction, but just one step in a longer journey.

            The issue of the looming “fiscal cliff”, automatic tax hikes and spending cuts which could knock as much as $500 billion (~3%) off the economy, still needs to be addressed, although this will become a post election agenda. For now, EURUSD remains in a trading range.


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