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NFP To Give The Dollar Direction

Apr. 06, 2018 7:15 AM ETUUP, UDN, FXE, FXY, FXB, FXF, FXC, FXA
Dean Popplewell profile picture
Dean Popplewell

By Dean Popplewell

Friday April 6: Five things the markets are talking about

There are perhaps more arguments in favor of a weaker US non-farm payroll this morning (08:30 am EDT), but given the recent strength of the dollar this week, the market seems to have been positioning itself for stronger labor-market numbers. If so, this would suggest that there should be a big reaction depending on the direction of the surprise.

Consensus is looking for an NFP headline print of +175k for March compared with a +313k rise in February that led to a massive equity selloff. The unemployment rate is seen falling to +4.0% from +4.1%. If the US labor markets report surprises positively today, something that is quite possible considering this week's strong ADP report (+241k vs. +206k), will fuel investor concerns about the US economy overheating, rate expectations could rise, supporting the dollar even further.

If payrolls exceed +200k, wage-growth rises by +0.3% and the unemployment rate falls as expected, USD/JPY should have the strength and momentum to break ¥108. However, if wages rise by only +0.2%, the unemployment rate holds steady and payrolls are less than +200k, the market will surely consider pushing USD/JPY below ¥106.80 again.

To ease off global risk sentiment, the U.S. non-farm payrolls should show limited signs of wage inflation and a resilient jobs activity, and Fed Chair Jerome Powell should sound "fairly neutral" during his speech later this afternoon.

Elsewhere, heading into the NFP release, European shares are under pressure along with US futures after President Trump's latest threat to target Chinese imports for another $100B in tariffs. US Treasury prices are climbing while commodities fall.

On tap: Fed Chair Powell will deliver a speech on the economic outlook during a visit to Chicago at 01:30 pm EDT. San Francisco Fed. President

This article was written by

Dean Popplewell profile picture
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.

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