We’re in for another NFP week trading, folks! Will this week’s catalysts provide enough fireworks to send the dollar sharply higher or lower?
NFP report (July 6, 12:30 pm GMT)
U.S. traders will take a break for the fourth of July holiday this week, but the fireworks won’t start until Friday when Uncle Sam prints its labour market numbers for the month of May.
Traders are expecting to see a net of 200,000 workers getting jobs for the month, a bit lower than the 223,000 figure we saw last month. Unemployment rate is expected to remain at 3.8%, though, while average hourly earnings are also seen to keep increasing by 0.03%.
Recall that the Greenback got a head start last month after the POTUS himself tweeted about “looking forward” to seeing the report an hour before it was released. The dollar still shot higher at the report’s release, but eventually gave up half of its intraday gains by the end of the day.
This week we can get clues on the actual release by taking a look at leading indicators like the ISM manufacturing PMI (July 2, 2:00 pm GMT), Challenger job cuts (July 5, 11:30 am GMT), ADP report (July 5, 12:20 pm GMT), ISM non-manufacturing PMI (July 5, 2:00 pm GMT), or even Trump’s Twitter feed.
Will better-than-expected reports push the dollar higher across the board?
FOMC meeting minutes (July 5, 6:00 pm GMT)
As mentioned in Forex Gump’s central bank roundup, Fed members had hiked their rates, upgraded their forecasts, moved their “dot plot” estimates forward, and generally sounded hawkish in their June 13 statement.
This week we’ll know more about how optimistic the members really are. Keep your eyes peeled for comments on inflation, Trump’s fiscal policies, and the string of economic reports that we’ve been seeing from Uncle Sam lately.
Global trade concerns
The NFP is not the only market-mover on the docket! On July 6 both the U.S. and China will start implementing additional tariffs on each other, the first major ones to kick in since the threats started heating up this year.
A lot of traders have already priced in their uncertainties about the impact of these tariffs, but we could still see some additional risk aversion plays if either Washington or Beijing threaten to step up their trade war efforts.
Also keep close tabs on crude oil prices. See, over the weekend Trump tweeted about getting Saudi Arabia to fill in Iran and Venezuela’s production gaps and increasing their production by as much as 2 million barrels per day. The move dragged on crude oil prices and inspired some traders to stay away from similar high-yielding assets.
Make sure you’re updated on the latest non-scheduled market-movers if you’re planning on making good trades this week!
Last Week’s Price Review
The Greenback was dethroned by the Loonie and then by the euro, so it’s currently on course to closing out the week in third place (as of 5:00 pm GMT). The Greenback’s still a net winner, though, which would mark the third consecutive week of net wins for the Greenback.
The Greenback started the week on a mixed footing before starting to tilt broadly higher during Tuesday’s London session.
There were no apparent catalysts for the Greenback’s rise on Tuesday, but as noted in Tuesday’s London session recap, market analysts were saying that the Greenback was feeding off the capital outflows from higher-yielding currencies due to the risk-off vibes brought about by trade tensions at the time.
The Greenback’s climb stalled during Wednesday’s Asian session and then resumed during the morning London session.
And as noted in Wednesday’s London session recap the Greenback found buyers after a CNBC report that cited an unnamed “senior administration official” and a separate report from The New York Times that cited anonymous “administration officials” claimed that U.S. President Trump has already decided not to push through with his original plan to ban Chinese and partially Chinese-owned companies from investing in U.S. tech companies in order to protect U.S. intellectual property.
Instead, Trump supposedly decided to go with Treasury Secretary Mnuchin’s idea to consult and use the Committee on Foreign Investments in the United States (CFIUS), which is deemed to be less punishing (for China) compared to Trump’s original plan to ban Chinese investments outright.
And these reports likely helped to ease trade-related concerns since China is less likely to escalate trade tensions by retaliating against the use of CFIUS.
U.S. National Economic Council Head Larry Kudlow did say during Wednesday’s U.S. session that Trump really did decide to use CFIUS, but that the decision is “not meant to be harder or softer,” adding that “It’s going to be very comprehensive and very effective at protecting our technological family jewels in the United States.”
However, Kudlow’s remarks only caused the Greenback to hesitate against the yen. As for the other currencies, not so much, since the Greenback continued to trend even higher after that.
The Greenback’s rally finally showed signs of fatigue on Thursday when most USD pairs traded roughly sideways and the Greenback closed the day on a mixed note.
And when Friday rolled around, the Greenback found itself being hit by selling pressure after China announced that it will allow more foreign investments, which drove up demand for the higher-yielding currencies at the expense of the Greenback.
The Greenback also lost out to the lower-yielding euro and safe-haven Swissy later on because, as mentioned in the weekly recap for the euro and Swissy, the euro spurted higher and the Swissy got a lift after news hit the wires on Friday that E.U. members agreed on a migration deal.