NFP Report Preview: How could it affect the Markets
There are a few facts we need to take into consideration.
The primary way that the NFP report influences markets is through its impact on monetary policy.
- As I have mentioned in my previous EURUSD report, markets are pricing in more than 50% chance of a rate cut from FED this year.
- The US labour market looks strong on most parameters and the weak increase in nonfarm payrolls in February was most likely a fluke after the big increase in January. Both February’s abnormally strong print and March’s peculiarly weak report may be influenced by seasonal and shutdown distortions, as the current 3-month average is 184k, roughly in line with the average over the last year and expectations for this month’s reading (180k).
It is obvious and historically proven that NFP reports would create high volatility on FX Markets.
Our NFP prediction:
ADP Report, ISM Non-Manufacturing Survey, ISM Manufacturing Survey and Initial Jobless Claims report released this week.
With both ISM surveys and initial jobless claims pointing to a stronger headline reading, we predict to receive a better than expected NFP report ( 190K-200K)
However, as the markets are pricing 50% rate cut, the reaction in the US dollar could be limited, even if we see a stronger-than-anticipated reading.
The unemployment rate and wages reading will also influence how traders interpret the strength of the reading.
The U.S Dollar is getting demand as a safe haven lately since it is the strongest currency among the others. Today’s Labor Market Reports will tell us something about the near future.
A better than expected U.S data may send EURUSD below 1.12000, XAUUSD below 1.277.
A worse than expected U.S data may send EURUSD above 1.13600, XAUUSD above 1.320.
Until NFP, we stay in “wait and see” mode.
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