The week begins with active and important statistics, i.e. the release of the PMI indicator from the USA and Europe, which is a leading indicator and gives an idea about the GDP benchmark. On the surface, it looks like everything should be as before, no problem: the projected U.S. PMI numbers rebounded to 60, on expectations of 58.7, which is also good. Also Non-Farm is expected to change for the better, from 49,000 to 180,000. The unemployment rate has somewhat halted the momentum of the 6.3% recovery, but if the positive statistics on jobless claims continue, it will be possible to predict the dynamics in advance. Nevertheless, behind all the stimulus and optimism in overcoming the virus, we see a very nervous reaction in the stock indices. On an external or news background, a lot of reasons can be made up after the fact, and they will be found, just to satisfy the interest of the mass reader. We have looked many times at correlations and those indicators to which both traders and portfolio managers react. Such turbulence makes investors more cautious, although it provides very interesting opportunities for intraday traders. The big downside of this whole story is that the market is already much higher than it was before the pandemic, but comparable numbers leave much to be desired, meaning the bubble continues to inflate and each new superstructure becomes another top of the pyramid. The market begins to gradually lay down the future inflation, and the Fed in this case is forced to raise rates, and then the natural effect is already resetting the business cycle.
What to expect this month:
Non-Farm Payrolls Employment
Last data: -49К
Consensus Forecast: 180K
The Non-Farm Payrolls report shows how many jobs were created or lost in the U.S. economy in the last month. It is usually released by the U.S. Department of Labor on the first Friday of each month. This report is important because the U.S. is the world's largest economy and the dollar is the world's reserve currency. Many countries peg their national currencies to this reserve currency, and many commodities, such as gold and oil, are usually denominated in dollars.
As such, the publication of this report tends to have a big impact on various markets - currencies, stocks, U.S. Treasuries, interest rates, and commodities - causing them to fluctuate in price immediately after the data release..
U.S. Average Hourly Earnings MoM
Last data: 0.2%
Consensus forecast: 0.2%
This indicator shows the change in the average hourly wage level for major industries, except agriculture.
Unemployment Rate
Past data: 6.3%
Consensus forecast: 6.3%
This ratio measures the percentage of the total labor force that is unemployed but actively seeking work and willing to work in the United States. A high percentage indicates weakness in the U.S. labor market. A low percentage is positive for the labor market in the states and should be taken as a positive signal for the U.S. currency.
Keep in mind:
- During the NFP announcement, expect high volatility, especially across USD pairs.
- Market sentiment can really affect currency movements. What traders expect from the report has as much impact as the actual released data, if not greater.
- A higher figure than the one registered during the previous month signifies an improvement in employment numbers. This, as well as the release of a higher-than-expected figure, mean an increase in the number of jobs created and are positive for both the U.S. economy and the dollar.
- A lower figure than the one registered during the previous month, as well as a lower-than-expected figure, usually have a negative impact on the dollar as they demonstrate a drop in employment numbers.
- Remember that the sudden spike observed across the charts of many currency pairs upon the release of the NFPs is usually followed by a period during which the market tries to recover and return to its initial price levels.
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