US NFP Preview：Why A Poor Release Could Favour Dollar?

Negative expectations on jobs data may limit dollar’s downside, sell gold?

Nearly no one is expecting a decent nonfarm payroll data for September due to bad weather in US. In other words, dollar selling after data are released could be very short-lived. However, if data surprise to the upside, dollar could spike.

• Data to be released this Friday, 8.30pm Beijing/HK time. Economists expect the figure to be at 82k only, due to bad weather condition.

• However, both ISM manufacturing and service PMIs in September suggested the economic activities were active. Manufacturing PMI rose to 60.8 versus previous 58.8, and service PMI jumped to 59.8 from 55.3.

• Both data suggested the pace of hiring in the largest economy was not slowing down much.

• Possibility on Fed to raise rate in December rose to 79.2%, according to CME FedWatch tool.

• If NFP is above 90k, we think dollar could climb on a surprising outcome. If NFP is below 90k, we expect dollar may fall initially, but price could recover quickly as Fed is not expected to take this data into its policy consideration.

• Potential dollar rise means gold to fall. We expect gold price may fall towards 1268 after NFP.