The U.S. dollar rally continued to soften Friday as the market awaits the November jobs report. The market expects a 150,000 increase in nonfarm payrolls with a 158,000 increase in private payrolls.
With the positive upside surprises in the ADP and the employment components of the ISM reports, we feel this morning's report poses some upside surprise risk which most likely would bolster risk appetite.
The euro continues to recover amid further talk of European Central Bank bond buying, which saw further narrowing in eurozone peripheral spreads. The euro cleared the $1.3250 hurdle with additional support from another good economic data release -- retail sales -- and is set to test the Monday high of $1.3300.
Meanwhile, sterling rallied on the back of the rising risk appetite, along with a run of improvement in U.K. economic data releases, with a run up to $1.5683 subsequent the PMI release.
The yen was mostly quiet in the Asian session as most market participants were sidelined ahead of the U.S. jobs report this morning. As such, a report in line in consensus may stoke a rise in U.S. bond yields, increasing the yield advantage over the yen, thus strengthening the dollar.
Elsewhere, the net change in Canada's employment was below consensus and despite the drop in the unemployment rate -- driven by a drop in labor participation as opposed to job creation -- weakened the Canadian dollar. The loonie fell back to $1.003 following the print.
European sovereign bond yields continued to decline with Ireland and Portugal leading the way with a large drop in the 10-year yields as anecdotal evidence suggests that the ECB continues to purchase periphery debt. Ireland's 10-year yield, for instance, is down 31 basis points with Portugal's yield down 23 basis points. Likewise, Spain's 10-year yields are down 12 basis points followed by a 4 basis points decrease in Italy's yields.