Dollar Soft Ahead Of Non-Farm Payroll, Stocks Tumbled Again

Dollar remains mildly soft as markets are awaiting the highly anticipated non-farm payroll report from US. So far, the reactions to solid economic data from US were mixed. Stocks tumbled with DOW and S&P 500 losing ground for the fifth straight day overnight. However, dollar failed to gain ground on these positive data with dollar index gyrating lower through 80.3 level. The greenback is staying in negative territory against the euro, yen, Swiss franc and Kiwi this week. Markets seems not to be buying on the case of a December tapering announcement from Fed no matter what despite all the speculations. March tapering is still the base case to most. And Fed could also try to pave out a paced schedule when that happens to smooth the impact to the markets.

Two Fed officials called for a time table for tapering the USD 85b per month asset purchases overnight. Dollar Fed Fisher urged to provide a "definite path as to when we reach zero" when deciding to start to scale back the quantitative easing program. Atlanta Fed Lockhart said when FOMC arrives at a decision to wind down asset purchases, "it will be helpful to the transition process to provide as much certainty as possible about how this will be done.”

Economists are expecting NFP to show 183k job growth in November, down from prior month's 204k. Unemployment rate is expected to drop slightly to 7.2%. Looking at the leading indicators to NFP, the ADP private job report was positive, with 215k growth, much better than consensus of 173k and was the highest figure in a year. Employment component of ISM services improved from 53.2 to 56.5. The 4 week moving average of initial jobless claims dropped from 348k to 322k. However, the employment component of ISM services dropped sharply from 56.2 to 52.5. Overall, an upside surprise in NFP is more likely. But, we'd be cautious on another knee jerk rally in the greenback.

Other data to be released from US include personal income and spending as well as U of Michigan consumer sentiment. Canada will also release employment data and is expected to show 7.5k growth in November and unemployment rate is expected to rise back to 7.00%. In European session, Swiss will release foreign currency reserves and CPI.

With no surprise, the ECB left the main refi rate unchanged at 0.25% in December, citing that the Eurozone inflation would stay well below target for the next 2 years. The deposit rate and the marginal lending rate stayed at 0% and 0.75% respectively. President Draghi did not rule out the chance of further rate cut next year with a negative deposit rate still possible. The central bank released a new set of economic and inflation forecasts. Both growth and inflation estimates appeared modest. In the UK, the BOE also kept the Bank rate at 0.5% and eft its asset-purchase target at 375B pounds More in ECB Left Rates Unchanged but Revised Lower Inflation Outlook.