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2 Aug 2013
Flash: Correlations identified USD vs NFP - Societe Generale
FXstreet.com (Barcelona) - Despite NFP forecasts for tomorrow are exceptionally concentrated, this is not a recipe to prevent large surprises either way, notes Olivier Korber, Strategist at Societe Generale.
Key Quotes
"There is a positive relationship between the dispersion of NFP forecasts and dollar strength. More forecasts dispersion is likely in the coming months, which should bring an end to July dollar weakness. The EUR looks however the single exception: a higher dispersion of NFP consensus does not boost the USD against the EUR."
"Market uncertainty regarding NFP can be gauged by the dispersion of economists’ forecasts surveyed by Bloomberg.The standard deviation of these forecasts is bottoming at 16k for tomorrow’s release. This is the closest NFP consensus seen since the start of 2012. Our US economist expects 195k, relatively in line with the average consensus at 185k. So the economists’ community comes to a strong agreement for a solid job report. However, Graph 2 shows that a strong consensus does not at all prevent large surprises. This leaves room for market squeezes and volatility spikes."
"A dispersed NFP consensus boosts the USD. USD G10 has been linked to NFP uncertainty since 2012 and 2013. A positive correlation means that the dollar tends to appreciate when the dispersion of the consensus is high. Also, the USD appreciates when the dispersion of forecasts widens."
Key Quotes
"There is a positive relationship between the dispersion of NFP forecasts and dollar strength. More forecasts dispersion is likely in the coming months, which should bring an end to July dollar weakness. The EUR looks however the single exception: a higher dispersion of NFP consensus does not boost the USD against the EUR."
"Market uncertainty regarding NFP can be gauged by the dispersion of economists’ forecasts surveyed by Bloomberg.The standard deviation of these forecasts is bottoming at 16k for tomorrow’s release. This is the closest NFP consensus seen since the start of 2012. Our US economist expects 195k, relatively in line with the average consensus at 185k. So the economists’ community comes to a strong agreement for a solid job report. However, Graph 2 shows that a strong consensus does not at all prevent large surprises. This leaves room for market squeezes and volatility spikes."
"A dispersed NFP consensus boosts the USD. USD G10 has been linked to NFP uncertainty since 2012 and 2013. A positive correlation means that the dollar tends to appreciate when the dispersion of the consensus is high. Also, the USD appreciates when the dispersion of forecasts widens."