A brand spankin’ new trading month means it’s time for y’all to prep for the NFP parade! Let’s look at the dollar’s potential catalysts this week.
One look at the forex calendar tells us that purchasing managers’ indices (PMI) from the manufacturing and non-manufacturing industries are scheduled for release over the next couple of days.
The Institute for Supply Management (ISM) is first with its manufacturing PMI due at 3:00 pm GMT today. Market players see it slipping further to 51.2 after May’s release reflected contracting imports, lower supplier deliveries, and higher raw materials inventories.
We won’t see ISM’s non-manufacturing PMI until Wednesday at 3:00 pm GMT. Like in the manufacturing release, analysts see a dip from 56.9 to 56.1 in June. The employment component of the report is a good leading indicator of the big NFP release, so y’all can bet that analysts will be watching this one closely.
Markit also has PMI reports scheduled though they’re the final versions of earlier releases so they might not rock the boat as much as ISM’s reports do.
The manufacturing PMI is expected to hold on to its 50.1 reading while the final services PMI is estimated to maintain its 50.7 figure. Watch out for hits or misses that can affect the dollar’s intraday price action!
U.S. NFP report (Jul 5, 1:30 pm GMT)
On Friday at 1:30 pm GMT Uncle Sam is scheduled to print its non-farm payrolls (NFP) report.
Recall that the economy gained a net of 75,000 in June, much weaker than the downwardly revised 224,000 in May and the 185,000 figure that analysts had expected. Unemployment rate steadied at 3.6, however.
The surprisingly weak data increased the odds of the Fed cutting its rates and dragged the dollar sharply lower across the board.
This week market players see the headline NFP improving to 158,000, average hourly earnings speeding up from 0.2% to 0.3%, and the unemployment rate maintaining its 3.6% reading.
Planning on trading the event? You could get clues from leading indicators scheduled before the actual NFP report. I’m talkin’ about the PMIs, the ADP employment change, and the weekly unemployment claims, yo!
Remember that traders are already worried that last month’s numbers point to the labor market weakening enough that the Fed will have to step in with more stimulus (read: rate cut).
If this week’s numbers disappoint, then we could see more rate cut bets and the dollar lose pips against its higher-yielding counterparts. But if we see upside surprises in employment and wage growth releases, then the Greenback could take back a pip or two against its major counterparts.
Missed last week’s price action? Read USD’s price recap for June 24 – 28!