Here are the top five things you need to know in financial markets on Friday, October 7:
1. September employment report on tap
All eyes will be on the U.S. employment report for September as markets look for clues on the state of the labor market and its impact on the Federal Reserve’s (Fed) future return to policy normalization.
The U.S. Labor Department will release its September nonfarm payrolls (NFPs) report at 8:30AM ET (12:30GMT) on Friday.
The consensus forecast is that the data will show jobs growth of 170,000, following an increase of 151,000 in August, the unemployment rate is forecast to hold steady at 4.9%, while average hourly earnings are expected to rise 0.2% after gaining 0.1% a month earlier.
2. Markets set to adjust Fed rate hike bets
An upbeat employment report will point to an improving economy and support the case for higher interest rates in the coming months, while a weak report would add to uncertainty over the economic outlook and push prospects of tighter monetary policy further off the table.
With most Fed officials already having indicated that the economy is “very close” to full employment, attention may look past job creation and focus more on the state of wages, especially for a Fed that is waiting for inflation to return towards its 2% target.
Most analysts dismiss the possibility of a November rate hike, citing the proximity of the U.S. presidential election. Markets currently price in the chance of an increase next month at just 14.5%, according to Investing.com’s Fed Rate Monitor Tool.
Most bets pointed to a December move with the odds at 63.4%.
3. Flash crash in sterling of more than 6%
The pound suffered a dramatic fall of more than 6% in Asian trading on Friday.
Analysts did not rule out the possibility of a “fat finger”, or human error, but most speculated that it could have caused by algorithms picking up on comments from French President François Hollande with the move exacerbated by thin trade.
Hollande took a rough position on the Brexit, as the move for the U.K. to leave the European Union (EU) is known, and suggested that the British government was prepared to move forward even if it was a “hard Brexit”.
“There must be a threat, there must be a risk, there must be a price,” Hollande said referring to the decision to exit the EU.
“Otherwise we will be in a negotiation that cannot end well,” he added.
After the initial crash, cable recovered positions but continued to show severe weakness. At 4:58AM ET (8:58GMT), GBP/USD was down 1.51% at 1.2427.
4. Global stocks mostly lower after sterling flash crash and ahead of U.S. jobs report
Asian shares fell on Friday with a plunge in sterling in the Asian day causing concern ahead of U.S. jobs data seen as a crucial part of the picture for chances of a rate hike by the Fed in December.
European stocks were mostly lower on Friday as the pound’s large move spooked investors and markets remained concern about the impact of the U.K. leaving the EU.
U.S. futures also followed global equities lower with investor’s cautious ahead of the employment data.
5. Oil holds above $50 on hopes for OPEC deal
Crude futures continued the bullish trend Friday on the back of optimism over an eventual deal among major producers to curb or cut production and the surprise drop in U.S. crude inventories seen this week.
Black gold continued to move higher on the back of comments from Algerian energy minister Nouredine Boutarfa who said that OPEC could cut output beyond the amount considered at the end of September if it was needed.
U.S. crude oil futures gained 0.30% to $50.59 at 4:59AM ET (8:59GMT), while Brent oil traded up 0.21% to $52.62.