Cable starts the year off in style. What's next

The pound is the top performer today and the US dollar is lagging. The pair is up nearly 1% in a quick start to 2018.

More importantly, the pair climbed through the December high and is now testing the best levels of last year. In September, the pair hit 1.3657.

Today's move is about broad USD weakness and some early optimism. What's interesting is that the pound climbed last week in one of the quietest news weeks of the year. That's typical of GBP but whenever the news picks up, it's usually (bad) Brexit news so the risks are rising.

Economic data risks are more two-sided and this week they include the Markit UK construction PMI (tomorrow), house price data (Thursday) and the services PMI with Q3 unit labor costs on Friday. There are no BOE speakers on the agenda.

The NFP for December is out on Friday in the US, due at 1530 GMT on December 5.

The consensus median for the headline is +190K after November's +228K

Nonfarm payrolls rebounded strongly in October and November following the hurricane-disrupted readings in August and September.

Incoming data on labor markets, including initial and continuing claims, point to another month of solid employment growth.

We expect nonfarm payrolls to rise by 175k, in line with the year-to-date monthly average, and for private sector payrolls to rise by 170k.

We look for the unemployment rate to decline by 0.1pp to 4.0%, for average hourly earnings to rise by 0.3% m/m and 2.5% y/y, and for average weekly hours to hold steady at 34.5.

Jr Trader Alexander Kumanov

Read more:

• NZD/JPY – Short with the main movement after a price action signal
• Jeffrey Gundlach: “USD’s next move is going to be down”
• Here’s a cable forecast for $1.40 till end of 2020
• NZD to 0.59 at end of Q1 2020
• Support for risky currencies as trade war hopes grow