What’s better than NFP week? How about NFP AND FOMC sharing the spotlight in one week? Here’s what you can expect from the events:
FOMC statement (Oct. 30, 6:00 pm GMT)
The biggest story for the dollar is the Fed possibly lowering its interest rates for a THIRD time this year.
If you’re just tuning in, know that the U.S. Federal Open Market Committee (FOMC) cut its interest rates by 25 basis points to a range of 1.75% – 2.00% in September, its second this year.
It didn’t do much damage on the dollar, though, mostly because the statement revealed that two voting members had said “nay” to the decision, while the Fed’s dot plot chart also showed at least five members not into the additional cut.
It also helped that Chairman Powell himself had not hinted of further easing. Aside from sharing that September’s rate cut is “insurance” against economic risks, he also emphasized that there’s no pre-set course to his team’s next decisions.
Will we see another “insurance” rate cut this week? Analysts point out that a third rate cut matches the “mid-cycle adjustment” done in the 90’s that Powell had referenced a couple of times.
If the Fed does ease further, then focus will likely turn to how convincing FOMC members are in communicating that they’re done with the “mid-cycle adjustment” for a while.
If Powell talks down Uncle Sam’s economic risks and removes the “act as appropriate” vibe in his speeches, then we could see the dollar rise.
But if he and his team talk about other ways to stimulate the economy *cough* balance sheet adjustments *cough* then the Greenback could lose pips against its major counterparts.
The start of another month means we get to trade another set of U.S. labor market reports!Last month saw the unemployment rate dropping to 3.5%, the lowest in 50 years.
Details were a bit less encouraging, though, since the economy had only added a net of 136,000 new jobs in September. That’s fewer than the 168,000-increase seen in August and the 145,000 addition that many had expected!
A closer look also showed wage growth stagnating for the month, while annualized hourly earnings fell to a 12-month low. The dollar dropped at the underlying weaknesses in the report.
Are we about to see further weaknesses this week? Unfortunately, most helpful leading indicators will be printed AFTER the official NFP is released. We only have the ADP report (Oct 30, 12:15 pm GMT) going for us and even that is expected to print lower numbers in October.
For now, you should know that the headline NFP could come in at 95,000, while the unemployment rate could tick higher to 3.6%. Average hourly earnings are expected to grow by 0.3%, however.