A pretty busy week for the dollar, which will deal with a potential Fed rate cut AND NFP-related shenanigans. Here’s what you can expect!
Rate cut from the Fed?
On Wednesday (Jul 31, 7:00 pm GMT) everyone and his momma are expecting the Fed to make good on their hints to cut their rates by at least 25 basis points for the month of July.
Since the move is all but priced in, traders will likely focus on what the Fed is planning beyond this week’s rate cut.
Last week’s not-so-terrible GDP and PCE reports lead a lot of market geeks into believing that the FOMC gang is cutting their rates as a one-time “insurance” against factors like global economic slowdown and trade-related weaknesses.
Not everything is set in stone, though. Just ask the Fed’s December 2018 projections that penciled in at least two more rate hikes in 2019.
Will we see a “one and done” rate cut? Are members angling for at least one more cut before the year ends? Or is this week’s decision just the start of a longer-term easing cycle?
The start of another trading month means we get to see another non-farm payrolls report!
If traders aren’t too busy pricing in FOMC and trade-related news updates, they’ll likely pay attention to the ADP report (Jul 31, 1:15 pm GMT) that’s expected to print at 150K after clocking in at 102K last month.
The Challenger job cuts (12:30 pm GMT) and weekly jobless claims (1:30 pm GMT) on Thursday will also get attention especially if traders start to speculate on what the headline NFP numbers will be.
Friday marks P-Day (P is for pips) for NFP geeks. Analysts see the headline figure coming at 160,000 after June’s 224,000 figure, while average earnings and unemployment rate readings are expected to maintain their 0.2% and 3.7% respectively.
Remember that last week’s GDP release showed consumption alive and kicking for the U.S. economy. If this week’s NFP numbers point towards a slowdown, then the Fed will have one more reason to consider another rate cut this year.
US-China trade talks
In case you missed it, the world’s two largest economies are set to resume their trade-related negotiations this week.
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are scheduled to arrive in Beijing on Tuesday to meet with China’s Vice Premier Liu He. Word around is that both parties will continue to hack at the issues that they’ve talked about last May.
Not a lot of people are confident that we’ll see a major breakthrough, though.
Last week Mnuchin shared that there are still “a lot of issues” to work through, while National Economic Council’s Larry Kudlow told us not to “expect any grand deal.” Lastly, the Donald himself said that he doesn’t know if China is up for a deal.
Still, some analysts say we could see small in the form of minor concessions from both parties. China, for example, could pinky swear on passing tech-related laws and buy more U.S. products, while the U.S. could ease up on Huawei and make noises about reducing existing tariffs on Chinese products.
Missed last week’s price action? Read USD’s price recap for July 22 – 26!