UBS On-Air: Paul Donovan Daily Audio 'Sending surveys into a void'
At a Glance
The desk anticipates significant ambiguity surrounding today’s US employment reports, driven by low survey response rates and compressed reporting timelines. Per the full note from UBS, both the October and November reports may reflect dubious quality, leading to an uncertain economic narrative. This environment has potential implications for market positioning, especially as traders may read the data through the lens of pre-existing biases. Current consensus regarding USD positioning could be influenced heavily by the interpretation of these reports moving forward.
Key Takeaways
- 01Today's US employment reports face scrutiny due to low response rates and time constraints.
- 02Ambiguity in the reports may lead to significant market volatility and biased interpretations.
- 03Current USD consensus indicates a broad range of expectations among top firms.
- 04Analysts are keen on how the employment data will shape trading strategies moving forward.
Full Analysis
What the desk is arguing
The desk raises concerns about the reliability of today’s US employment reports due to significant limitations in data collection processes. Paul Donovan from UBS highlights that the October figures lack household survey data and the November data has been rushed, potentially skewing results.
With response rates already alarmingly low, the quality of the information available to the market is questionable. In a climate of skepticism regarding the authenticity of survey results, we expect heightened volatility in USD liquidity as market participants reactively adjust their strategies based on these reports.
Where it sits in our coverage
Our consensus target for the USD remains at 1.075, with a range from 1.04 to 1.12. Specific targets from other firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's positioning aligns closely with jpmorgan's relatively optimistic target, diverging from bofa's more conservative outlook at the lower range of our consensus. Given the uncertainty in the data about the employment situation, our call leans toward the cautious side amid widespread divergence in market sentiment.
How other firms see it
Firms like jpmorgan and others seem to be bracing for a potential positive spin on employment data, while bofa stands in opposition, indicating a bearish perspective on the USD. As uncertainty looms in the labor market outlook, we could see your sentiment across other pairs fluctuate, particularly USD/CAD and EUR/USD, which are sensitive to labor market performance.
What the calendar says
No additional high-impact events are scheduled on the calendar in the next 30 days, which means today's employment reports may play a critical role in setting market direction for the foreseeable future. As such, traders should be on the lookout for how the market reacts post-report release.
Market Implications
Traders should monitor the immediate reaction of the USD around the 1.075 level, as today's employment report could dictate market dynamics. A deviation in the interpretation of these figures could lead to shifts in positioning ahead of year-end adjustments.
From the original
It is US employment report Tuesday, with a bowdlerized October report (no household survey) and a rushed November report of dubious quality. Response rates to surveys are already horribly low, and whatever motivates someone to complete a survey most people ignore at a time when t
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