Please Fasten Your Seat Belts, Jobs Report Ahead

So obviously it was a relatively quiet overnight session as the entire world focuses on the February payrolls report, not so much because anyone outside of the US gives a sh*t about the extent to which American employers are feeling “great again” about the outlook for the economy, but rather because of the implications today’s NFP print has for the trajectory of Fed policy.

That is, a March hike may be a foregone conclusion (oh what a difference four weeks makes in that regard), but if we get a barnburner today to match Wednesday’s ADP data, well then you might want to factor in one more hike this year.

(SocGen)

Clearly, that has implications for rates and, as noted earlier this morning, the dollar.

Speaking of the dollar, Bloomberg notes the greenback “swung between gains and losses [overnight] as the Dollar Spot Index was set for it biggest weekly increase this year, and reached its highest level since Jan. 20 as traders positioned for a stronger-than- expected employment report, only to reverse its early daily advance as the London session got underway.” Here’s what that looks like:”

Meanwhile, WTI rose on the day but stayed below $50/bbl after (another) sharp decline on Thursday. “It felt a bit like a balloon popping,” Michael Poulsen, analyst at Global Risk Management told Bloomberg. “It’s never a one-way direction. There’s usually a breather.” Yeah, well not this time, Michael. And I could have told you this was coming two months ago.

You should also note that a South Korean court upheld the impeachment of Park Geun-hye raising the specter of prison and closing the book on a dramatic reversal of fortune. The decision triggers elections that must be held within 60 days. Here’s a rundown of analyst reactions (via Bloomberg):

National Australia Bank (Christy Tan, head of markets strategy)
- Ruling is positive for South Korean stocks as investors can now move on and shift their focus to the presidential election
- Potential candidates have all committed to chaebol reform and that’s perceived as Kospi-positive in the medium term
- KRW will likely track the broader USD trend and bias is for USD/KRW to test 1,165.5 100-day moving average in near term

Standard Chartered (economists and strategists including Chong Hoon Park)
- With political uncertainty removed and election likely in May, South Korea’s economy should see upside potential and won may receive short-term boost
- But currency is still vulnerable to new concerns around the upcoming elections and trade tensions with China
- Stronger dollar will support forecast for won to weaken to 1,180 per USD by year-end

Mizuho Bank (Masakatsu Fukaya, emerging mkt trader)
- Won’s rebound on court ruling may be limited because sentiment for the dollar to strengthen remains strong
- Investors await U.S. jobs data and won’s direction may continue to be driven by USD in the short term, rather than Korean politics

Capital Economics (Krystal Tan, economist)
- Ruling should provide a boost to short-term growth prospects
- Return to normality to bolster sentiment badly damaged by the political scandal and pave the way for fiscal stimulus
- Sharp rebound is not on the cards as growth is likely to be held back by high household debt, ongoing restructuring of the shipbuilding industry and increasing external headwinds
- Longer-term outlook will depend on any progress the new govt is able to make in pushing through key reforms aimed at tackling the country’s mounting structural problems

Natixis Asia (Trinh Nguyen, senior economist for emerging Asia)
- Markets are hoping that South Korea’s recent period of ‘paralysis’ will soon come to an end with ruling
- “Much of the long-standing issues for Korea have been on a standstill due to the political scandal and the hope of having a new leader brings back prospects of reforms and progress”

Suhyup Bank (Jude Noh, chief currency trader)
- “Political uncertainty has eased and market is feeling a wave of relief right now. But this is likely to be short-lived”
- Market’s focus will revert to global events in coming weeks and traders are set to become more cautious from next week
- USD/KRW could fall to as low as 1,150 Friday

The Kospi closed higher. Here’s the rest of the overnight action across markets (Europe up to date as of pixel time):