Main event of the week: Nonfarm Payrolls report
Markets’ attention will turn to next Friday ‘s Nonfarm payrolls (NFP) report in U.S. looking for signs on economic recovery in U.S and when the Fed may hike its interest rates . The US Non Farm Payrolls publication is considered as one of the most important indicators which determine the health of the world’s largest economy.
Accordingly, the expected reaction scenarios will be as follows:
1/ within expectations:
The economic analysts expect that the US labor market will add 225,000 new jobs higher than the previous reading 209,000 while the unemployment rate is expected to remain unchanged to decline from 6.2% to 6.1%
The Fed is then expected to hike interest rates anytime soon following improvement in major economic indicators and inflation is picking up.
As of yesterday, the U.S. ISM Manufacturing PMI data released upbeat expectations; the index showed a reading of 59 versus 56.8 forecasted, the ISM grew at the fastest pace since 2011.
If the NFP data will surprise the market and rise above expectations (225,000 ) or above the previous reading, we will see a significant rebound of the U.S. dollar. As an upbeat data may encourage the Fed to continue reducing the monthly asset purchases in the next 2 or 3 months. And the bank may hike its interest rates decision sooner than anticipated.
The NFPs can drop below expectations, which would negatively affect the U.S. dollar , and can push the monetary policy makers to review the Fed monetary policy decisions, so it would represent a negative signal and show that the US economy remains vulnerable.
On the other hand, yesterday the greenback rose significantly against a basket of major currencies, after the release of positive data which showed the strong recovery of the world’s largest economy.