The first Friday of October should have been dominated by the pivotal US non-farm payrolls data release which would have triggered fresh speculation and debate surrounding both the economy’s health and the prospects for a tapering of Fed bond purchases. The data would also inevitably have sparked a big market reaction as it is the primary monthly release.
The US Federal government shutdown, however, meant that the payrolls estimate could not be released which left markets in something of a vacuum with a lack of fresh incentives.
There was further uncertainty surrounding potential congressional negotiations surrounding the budget and there were also concerns that these negotiations would also start to ensnare separate discussion surrounding the debt-ceiling limit. Markets remained nervous over both the possibility of an early budget agreement or the possibility of a protracted dispute which curbed risk taking and maintained an important focus on position adjustment ahead of the weekend.
Regional Fed President Fisher maintained his critical tone towards the failure to taper bond purchases at the September FOMC meeting, but he is a non-voter on the FOMC.
After pushing to highs just short of 1.3650 on Thursday, the Euro was unable to secure any additional buying momentum and remained vulnerable to profit taking following a strong advance since the previous US employment release. After failing to break resistance, there was a retreat back to test 1.3580 support.
USD/JPY was able to find support on dips to below the 97 level without being unable to generate any buying momentum while USD/CHF bounced back above the important long-term support level at 0.9000.
Sterling was the stand-out mover during the day as the weaker trend which had started to develop on Thursday kicked-in with greater force. Failure to break above the 1.6250 area triggered initial profit taking on GBP/USD and a break through support levels near 1.6150 triggered a more substantial decline on stop-loss selling. Sterling dipped to lows below 1.6050 before finding some respite while EUR/GBP rallied to the 0.8475 area.