It’s the start of a brand new month and you know what that means – it’s NFP week, yo! Here are other reports that might affect the dollar’s price action this week.
Here are reports and events that you should pay attention to:
FOMC statement (May 6, 6:00 pm GMT)
We’ll find out on Wednesday if Chairman Powell and his team will walk the talk and put their hawkish biases on the official papers.
If you recall, almost all members who have given speeches in the past couple of days have hinted that they’re in favor of raising rates at least three times this year.
Will this week’s statement set the tone for a June rate hike? Or will the members choose to be more cautious instead and choose to wait for other data releases and the impact of higher bond yields on the economy?
What’s an NFP week without NFP-related reports, amirite? The party will start with the ISM manufacturing PMI tomorrow at 2:00 pm GMT. The ADP report will follow on Wednesday, though you might want to be careful ahead of the FOMC statement.
The Challenger job cuts (11:30 am GMT) and ISM non-manufacturing PMIs (2:00 pm GMT) will pop up on May 3 before the NFP report is revealed to us on Friday, May 4 at 12:30 pm GMT.
Analysts are expecting the unemployment rate to chill from 4.1% to 4.0% in April, while a net of 185,000 is expected to have found jobs after the 103,000 uptick in March. Last but not the least, average hourly earnings is expected to clock in a 0.2% increase after March’s 0.3% growth.
Before you trade the event like there’s no tomorrow, though, you should know that the NFP report will follow the FOMC statement. So unless Powell and his gang didn’t give us much to go with in their release, it’s likely that traders will shrug off what the labour market has to say this particular month.
Word around the hood is that Trump is sending U.S. Treasury Secretary Steve Mnuchin as well as other top bosses like National Economic Council head Larry Kudlow, and White House trade adviser Peter Navarro to Beijing later this week to really start talking trade.
If Trump refrains from t̶h̶r̶e̶a̶t̶e̶n̶i̶n̶g̶ tweeting about Uncle Sam’s major trading partners, then we might see a bit of optimism ahead of and during the trade talks.
But if Trump and/or his team present inflexible views during the negotiation, then we might see some of the trade war fears start to creep back into the markets.
Last Week’s Price Review
Like last week, the Greenback steamrolled all opposition to emerge as the one currency to rule them all (as of 5:00 pm GMT).
And like last week, the Greenback’s broad-based strength was attributed by market analysts mainly to the rise in U.S. bond yields since the rise in U.S. bond yields point to higher inflation expectations, which reinforces the idea that the Fed will keep on hiking.
And that, in turn, puts interest rate differentials and monetary policy divergence into play, with the Greenback being the main beneficiary.
U.S. bond yields eventually fell on Thursday after benchmark 10-year yields briefly breached the 3% mark.
However, the Greenback held onto its gains, so the narrative that bond yields were driving the Greenback higher didn’t really work anymore. U.S. bond yields remain elevated despite the slide, according to market analysts, and that supposedly prompted dollar bears to unwind their short positions.
Other than that, the net positive data released on Thursday may have also lent support to the Greenback.
U.S. bond yields resumed their slide on Friday and yet the Greenback held steady. Well, for the most part at least since Greenback bulls eventually showed signs of fatigue after the U.S. Q1 GDP report was released.
You see, the GDP report revealed that the U.S. economy expanded at a faster-than-expected pace (2.3% vs. 2.0% expected) but the GDP price index failed to meet expectations (2.0% vs. 2.2% expected).
In other words, the GDP report was mixed. And that may have prompted some profit-taking.