Today, Wednesday, marks the 43rd day of the US government shutdown, and there is a good chance that it will be ended by the House of Representatives and a subsequent signature by the US President. It is still unclear exactly when the first data will be published, and there will be lengthy discussions about how distorted it is, but at least there is now the prospect of official data again. In joyful anticipation, the euro rose briefly above 1.16 against the US dollar yesterday, and implied volatility over the next three months also rose slightly again, Commerzbank's FX analyst Volkmar Baur notes.

Upcoming data releases may increase volatility in EUR/USD again

"However, it is highly likely that we will ultimately find that not much has happened. In the absence of official data, many indicators that are otherwise hardly noticed have received a lot of attention (looking at you, ADP). However, there is a reason why these indicators are hardly noticed in normal times: because they are wrong at least as often as they are right. But somehow, the news has to be filled during a shutdown like this, and speculating is kind of fun, which is why anecdotes such as ‘this company wants to cut so many jobs’ receive increased attention and people forget that even 10,000 job cuts are a very small number compared to the 1.7 million jobs that are lost on average every month in the US."

"Even without the government shutdown, initial jobless claims, which are published weekly, are a very good leading indicator. And here, not much has changed in recent weeks. Although the figures are not published at federal level, the states publish their figures separately and these can simply be added together. And there are no signs of rising layoffs yet. The other is the unemployment rate nowcast from the Fed in Chicago. Although this indicates a slight increase in the unemployment rate, and at 4.36% the figure would then round up to 4.4%, the pace of the increase is still very manageable though (September was 4.34%)."

"It may well be that the upcoming data releases will increase volatility in EUR/USD again, but a sustained weakening is probably not in the offing. In any case, I assume that USD weakness will be due to the Fed continuing to cut interest rates in December and also in the new year, although it is unclear whether the labour market and the economy justify this. And this circumstance (i.e. Fed independence) is likely to cause renewed weakness."