U.S. Nonfarm Payroll data to support USD

With U.S. Nonfarm Payroll data scheduled later this week, the USD is likely to find support at the weekend. The greenback is expected to outperform on expectations of a creation of 225k jobs in December (consensus: 200k) and on consistent employment reports (average job creation of 150k or more). Presently, the Fed funds price in only about 10bp for March, but on expectations of additional job creation, the Fed might hike the rate to 25bp in the first half of 2016.

ISM manufacturing and services is scheduled next Monday and Wednesday respectively. Despite global economic slowdown, market expectations point towards improvement in manufacturing and services on growing domestic demand. Manufacturing is likely to grow to 49.0 from 48.6 and services to 56 from 55.9, while drop of 0.2% m/m is expected in November factory orders (scheduled on Wednesday) after witnessing an increase in November.

"We think the USD will outperform and the Fed will be comfortable delivering another 25bp hike in H1, followed by an additional 50bp of hikes in H2 this year," noted Barclays in its research note