The first client note from Barclays for the new year has hit the nail on the head today:

  • The FX market will likely start 2016 with a strong sense of déjà vu
  • Many themes from last year remain firmly in place
  • Most notable are the monetary policy divergence led by the Fed
  • Lower commodity prices
  • The role of a weaker China/EM in the global recovery

On the data due this week:

  • Chinese manufacturing PMI is likely to disappoint (it did)
  • Euro area inflation should remain very low (Tuesday)
  • Friday's US NFP report is likely to beat expectations (Barclays: 225k; consensus: 200k), supporting continued Fed tightening

More from Barclays on their expectations for this week's (Friday) US nonfarm payroll report:

  • The USD will likely find support in Friday's NFP report
  • Average job creation of 150k or more during the next few employment reports should be consistent with a gradual increase in the fed funds rate
  • Therefore, taking into account our expectations of a creation of 225k jobs in December (consensus: 200k), 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