Cable at 200-dma, NFP Next

The US dollar is up against all major currencies with the exception of the Japanese yen since 10 pm London yesterday. European indices are back in positive territory but US futures indices are in the red. The pain in cable continued on Thursday with a drop to a fresh low dating back to January 10. Non-farm payrolls are due up next (see details below) and Premium trades are likely to emerge following the release of the figures.

Cable attempted to bounce but a broad bid in the US dollar on risk aversion sent it as low as 1.3535. That number is significant because it's exactly the 200-day moving average. Whether due to technical buying or a reversal in equity market fears, cable bounced to 1.3570 from there to finish flat on the day. A report in the Telegraph said the UK could remain in the customs union until 2023 due to problems implementing a border, not to mention the seeming inability of anyone in the UK government to find a workable transition deal.

On net, that's good news as a lengthened timeline will encourage some medium-term investment. We're also now less than a week away from the BOE meeting and with odds of a hike at 9%, the headline risk is skewed towards a signal of a hike sometime in the next few months. The market is pricing just a 52.6% of a rate rise through the September 13 meeting.

Onto US Jobs

In the short-term, the US dollar side of the equation is the bigger risk. Friday brings non-farm payrolls and a renewed focus on wage inflation. The consensus for jobs is 192K but note that the employment component of the ISM non-manufacturing report was at a one-year low at 53.6 compared to 56.6 prior and that's a downside risk.

Still, the market will be overwhelmingly focused on wage growth with average hourly earnings forecast at 0.2% m/m and 2.7% y/y. A higher reading could send 10-year yields right back to 3% from 2.94% Thursday. If so, the dollar could make broad gains outside of USD/JPY where risk aversion would hit.

We also continue to keep an eye on emerging markets after Argentina's central bank hiked rates for the second time in a week, bumping them 300 bps to 33.25%. The Argentine peso continued to fall Thursday and is now down 8.2% over two days and other EM currencies are suffering as well, adding a board bid for dollars.