Welcome to another NFP week, folks! Let’s take a look at catalysts that might affect the Greenback’s price action:
Non-farm payrolls (Sept. 5, 12:30 pm GMT)
What’s an NFP week without the monster NFP report?
On Friday analysts are expecting to see a net of 191,000 workers finding jobs for the month of August, higher than the 157,000 increase that we saw in July.
But that’s not all that’s in the report. Markets also expect the unemployment rate to remain at 3.9%, while wages are expected to maintain their 0.3% monthly increase.
Lower-tier reports scheduled over the next couple of days could give us clues to Friday’s release. For example, we could get clues on employment in the manufacturing with the ISM manufacturing PMI scheduled tomorrow.
And then there’s the ADP report and ISM’s non-manufacturing PMI scheduled on Thursday.
If you’re planning on trading the report, then you should remember that traders had paid more attention to wage growth in last month’s release. Make sure you’ve considered any and all scenarios when plotting your trading plan!
U.S. trade negotiations
As you can see below, dollar traders are very much interested in the outcome of the U.S.’ trade negotiations with its major partners.
U.S. and Canadian representatives are scheduled to resume their talks on Wednesday and, if the U.S. reps go along with Trump’s wishes not to give concessions to Canada, then we might see a bit of risk aversion across the board.
And there’s the ongoing U.S.-China tariff war. Trump threatened that his administration could slap 25% tariff on an additional $200 billion worth of China’s goods on top of the $50 billion that’s already been implemented.
If Trump’s team makes advances their plans, or if China makes similar threats, then traders may once again head for safe haven bets. After all, a trade war between the world’s two largest economies would affect A LOT of export-dependent economies.
Aside from the pain that the U.S., China, and Canada will sustain with trade wars, the world will look at how the world’s largest economy deals with friendly or hostile trading partners and use it as benchmark for other countries’ prospects down the road.
Last Week’s Price Review
The Greenback is mixed but a net winner for the week (as of 5:00 pm GMT), so two weeks of consecutive net losses for the Greenback is finally over … assuming the Greenback can maintain its ranking.
The Greenback had a slow and steady start but began to tumble when rumors emerged that the U.S. and Mexico were able to come to a compromise, likely because the rumors encouraged the unwinding of safe-haven bets on the Greenback.
The Greenback’s slide would eventually stop when the agreement was officially announced.
However, sellers would return on Tuesday. There were no fresh negative catalysts for the Greenback, but as noted in Tuesday’s London session recap, market analysts were still blaming the Greenback’s slide on unwinding of safe-haven bets because of progress in trade talks.
Thankfully (for USD bulls), CB’s consumer confidence index provided support when the reading for August came in at 133.4 (126.6 expected), which is the best reading since October 2000.
The buck then tilted slightly but broadly higher after that. And aside from CB’s consumer confidence index, market analysts also pointed to fading optimism over the US-Mexico trade pact and lingering jitters over the ongoing trade war between the U.S. and China.
The Greenback’s price action became a bit mixed and wonky when Wednesday’s U.S. session rolled around, though. However, broad-based selling pressure eventually became apparent by 15:00 GMT, likely because of further unwinding of safe-haven bets on the Greenback since the buck started to buckle after Canadian Foreign Minister Chrystia Freeland’s commented that:
“We are optimistic about having some very good, productive [trade] conversations this week.”
The Greenback’s price action would become mixed again come Thursday, though, that is until most USD pairs appeared to wobble when Bloomberg released a report that cited six unnamed sources as saying that Trump supposedly “wants to move ahead with a plan to impose tariffs on $200 billion in Chinese imports as soon as a public-comment period concludes next week,” as the report puts it.
However, the Greenback’s weak slide would stop and eventually reverse after a later Bloomberg interview wherein Trump threatened to pull out from the WTO while also saying that the E.U.’s trade policies are supposedly “almost as bad as China,” adding that the E.U.’s proposal to scrap auto tariffs is just “not good enough.”
The Greenback then steadily gained against its peers after that as the trade tensions fueled safe-haven demand for the Greenback, market analysts say.
The Greenback did have a harder time against the safe-havens yen and Swissy, but even they were forced to bend the knee by Friday, likely because of additional and/or returning safe-haven flows after the a report from the Globe and Mail claimed that Canadian officials were concerned that a final NAFTA deal would not be reached on Friday, which was followed shortly by a spokeswoman for the United States Trade Representative (USTR) communicating via email that:
“The negotiations between the United States and Canada are ongoing. There have been no concessions by Canada on agriculture.”
Incidentally, the Globe and Mail report gave the Greenback a final bullish boost that allowed it to overtake the Loonie and the euro. Before that, the Greenback was on track to closing out the week as a net loser.