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Rounding out the Week with US Jobs


The US dollar is going into the monthly jobs report bid. It has risen against all the major currencies, save the Australian dollar that is up less than a tenth of one percent at pixel time. There are two main considerations. First, many speculators had given up on the strong dollar story. This was evident in the positioning in the futures market, and the numerous articles in the business press arguing the dollar bull market was over.

Second, the divergence story has reemerged. It is not, as some have argued, all about the ECB. Clearly, the second largest decline of sterling in H2 15 took place on Thursday in response to a more dovish than expected BOE.

Moreover, the fact of the matter is that the US two-year yield has risen 22 bp since October 27. It reached a four-year high of 83 bp. Note in an unusual development, there appears to be a small gap in the yield (~81.5bp to 82.1 bp) though it does not appear in the futures chart. Both Yellen and Dudley indicated that a rate hike next month was likely next month unless the economy disappointed.

That does not seem like such a high bar for the October jobs report. The Bloomberg consensus is for a net increase of 185k jobs. The...