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Welcome to another NFP week, folks! Let’s take a look at the catalysts that might move the Greenback over the next couple of days.

NFP week shenanigans

What’s a non-farm payroll (NFP) week without NFP-related reports?

Recall that the report mostly disappointed expectations last month despite showing a lower unemployment rate. See, job and wage growth remained tepid, while a dip in labour force participation rate hinted that it’s not job increases that pulled the unemployment rate lower.

This week analysts are expecting Uncle Sam’s unemployment rate to maintain its 3.9% rate. In addition to that, they also see net job gains at around 190,000 after showing a 164,000 gain for the month of April. Last but not the least, growth of average hourly earnings is expected to accelerate from 0.1% to 0.3%.

The party will start with the ADP report on Wednesday (12:15 pm GMT) which will be followed by the Challenger job cuts data on Thursday at 11:30 am GMT.

Last week’s FOMC meeting minutes already hinted that Governor Powell and his team are pretty sure they’ll need another rate cut “soon.” Will this week’s release push the FOMC members to pull the trigger this month?

Trump team decisions and updates

President Trump has been busy lately and, no, it’s not because he’s preparing to sacrifice the The Interview cast and crew to his new BFF Kim Jong-Un.

Aside from his (apparently not cancelled) meeting with the North Korean leader, market players will also want to hear about the ongoing trade negotiations between the U.S. and China as well as the U.S. and its NAFTA brothers.

Any one of these themes could make or break risk sentiment over the next couple of days, so make sure you stay glued to the tube to see if there are any game changers or strong reactions that you can take advantage of!

Last Week’s Price Review

The Greenback is currently mixed for the week but on the losing side (as of 5:00 pm GMT). The Greenback could still close out the week on the winning side, though, since the Greenback was only slightly edged out by the Kiwi.

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart

Despite the mixed performance, the Greenback’s price action was actually somewhat uniform. The Greenback therefore wasn’t just being pushed around by its peers.

Having noted that, the Greenback had a somewhat strong start before sliding when Monday’s London session rolled around.

And as noted in Monday’s morning London session recap, it looks like the Greenback was taking directional cues from U.S. bond yields. Although I also pointed out that the Greenback’s rally began to stall a couple of hours before U.S. bond yields did. No clear reason for that, though.

Anyhow, the Greenback continued to slide during Monday’s U.S. session. And as mentioned in Monday’s U.S. session recap, that was likely due to the slide in U.S. bond yields. Although cautious remarks from a bunch of Fed officials may have also weighed on the Greenback.

The Greenback’s finally began to find support on Tuesday. In fact, if we remove USD/CHF and USD/JPY, we can see that the Greenback even began to recover lost ground against its peers. There was no clear reason why, but market analysts suggested preemptive position ahead of the FOMC minutes.

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart

Speaking of the FOMC minutes, Forex Gump already has the deets, so check out his 4 Highlights From The May FOMC Minutes.

The gist of it, though, is that the Fed signalled that another rate hike would be appropriate “soon” which opens the way for a possible June rate hike. However, the Fed was also worried that inflation expectations remain low, which is why the Fed thinks that:

“[A] temporary period of inflation modestly above 2 percent would be consistent with the Committee’s symmetric inflation objective and could be helpful in anchoring longer-run inflation expectations at a level consistent with that objective.”

In other words, the Fed will allow inflation to temporarily overshoot its 2% target instead of hiking aggressively to keep inflation in check, which is a dovish message and likely disappointed rate hike junkies who began dumping the Greenback.

The Greenback’s post-FOMC selloff eventually began to lose steam and the Greenback’s price action became more mixed by Thursday. However, the Greenback began to encounter fresh sellers after Trump tweeted the following:

The Greenback did regain its poise later on when North Korea responded in a cordial manner, with Vice Foreign Minister Kim Kye Gwan saying that Pyongyang is “willing to give the U.S. time and opportunities” and is ready to talk “at any time, (in) any format.”

The Greenback then steadily gained against its peers after that. Although risk aversion in the U.S. and returning risk-off vibes in Europe did allow the yen and the Swissy to fight back against the Greenback’s advance.