Will NFP Help The US Dollar?
Last week's FOMC statement supported the December rate hike speculation and strengthened the US Dollar through mid-week; however, slower than expected GDP growth, coupled with weaker Personal Spending details, erased the greenback's rise and pulled it towards the negative weekly closing. The Euro region currency registered considerable gains during later weekdays as ECB President, Mario Draghi, tamed chances of further monetary stimulus announcement during December meeting in his interview with Italy's Il Sole 24 Ore, published on Saturday. Moving on, the JPY strengthened against majority of its counterparts after BoJ refrained from adding further stimulus and the central bank Governor seemed hawkish even after downgrading the inflation forecast while the commodity currencies, namely AUD, NZD and CAD, remained volatile due to aftershocks of Chinese rate cut and mixed domestic cues.
During the current week, which started with another downbeat reading of Chinese Manufacturing PMI, many important events/releases are scheduled for publish that can continue fueling the Forex moves. However, labor market details from the US, Canada and New-Zealand, Quarterly Inflation Report by the Bank of England (BoE), Fed Chair's Testimony and the monetary policy meeting of the Reserve Bank of Australia (RBA) are likely to gain major market attention. Moreover, headline PMIs and Manufacturing Production releases from UK together with Trade Balance details from Australia, US and Canada are some of the second-tier economics that could keep global financial market players busy throughout the present week.
All Eyes On US Job Details
Even if the recent US economics failed to impress the USD bulls, monthly reading of US labor market numbers, mainly the Non-farm Payrolls & Unemployment Rate, will provide guidance to the greenback moves as further improvement in job details can continue favoring the FOMC statement that the December rate hike is still on table.
As one can easily point out from the aforementioned chart, the US Non-farm Payrolls have been above 200K mark for most of the last two years; however, recent readings during the month of September and October have been disappointing as the last month NFP plunged to the six months' lows. On the contrary, the unemployment rate has been steady around more than seven year's low of 5.1%. The US Bureau for Labor Statistics is scheduled for releasing the October month job details, including Average Hourly Earnings, Non-farm Payrolls & Unemployment Rate, on Friday while the ADP Non-Farm Employment Change, an early signal to determine government job details, is to be released on Wednesday. Forecasts relating to the ADP number point a weaker reading of 183K against 200K prior; however, NFP consensus says that the workforce engagement is improved from its previous 142K to 179K level and Unemployment Rate is expected to remain stable around 5.1% mark.
With the expected rise in NFP and a low level of Unemployment Rate, coupled with recent signals from the Fed favoring December rate hike, a better job outlook will provide fresh life to the speculators who expect Fed's first interest rate lift since 2006 during December and could trigger the US Dollar rally.
In addition to the Friday's labor market numbers, Fed Chair's Testimony on bank regulation before the House Financial Services Committee, scheduled for Wednesday, becomes another important US event. Although the central banker isn't scheduled to utter on the matters relating to Fed's next move, question-answer session by the committee may cause the Federal Reserve head to speak about something that can hint for future monetary policy of the US central bank and can help the market players determine the USD moves. Should the bank chief points to the economic improvement and a December rate hike, as she has been doing quite off-late, chances of the USD up-move can't be denied.
Moreover, monthly readings of ISM Manufacturing PMI, Factory Orders and Trade Balance, coupled with the weekly Jobless Claims, are some additional US data points that can better help in forecasting near-term USD moves. Considering recent decline in global manufacturing, the ISM Manufacturing PMI, scheduled for Monday release, is expected to slow-down a bit to 50.00 mark against its 50.2 prior; however, Tuesday's Factory Orders are likely to cut short its previous -1.7% mark with -0.8% number and can help the USD manage its firmness. Further, Trade Balance numbers, scheduled to be released on Wednesday, indicates considerable decline in deficit to -42.7B from its -48.3B previous month reading while Thursday's weekly Jobless Claims can test the five week high of 263K versus 260K prior week's mark.
No Major Releases From Europe While UK PMIs and BoE To Direct GBP Moves
Monthly reading of German Factory Orders, scheduled for Thursday, becomes the only important announcement scheduled during the week from Europe that can help foresee EUR moves. As the German gauge of factory purchases is expected to reverse prior two month's decline with 1.1% gain, an actual figure matching with/or surpassing the consensus can add strength into the Euro.
Slew of headline UK PMIs triggered by the Monday's Manufacturing PMI that rallied to the highest levels in more than a year and helped the GBP advance. However, PMIs relating to Construction and Services, scheduled for Tuesday and Wednesday respectively, coupled with the Friday's Manufacturing Production, are some data points that can provide better sources of information to determine near-term GBP trend. While the Construction PMI is likely to adjust a bit from its seven month's high of 59.9 to 58.9, the Services PMI, core to the UK economy, may improve to 54.6 as compared to its 53.3 prior. Moreover, consensus relating to the Manufacturing Production points slightly slower growth of manufacturing into the Britain with 0.4% mark versus 0.5% prior. As major data points favor an improvement in UK economy, chances of the GBP to witness up-move are much higher should the actual numbers meet consensus.
Thursday becomes an important day for the GBP traders as Bank of England is scheduled to fuel the Forex market during the same day with its lined up important events. The central bank is to hold its monetary policy meeting and release the minutes for the same, alike recent MPC meetings, together with publishing the important Quarterly Inflation Report (QIR) that will be followed by a press conference from BoE Governor.
Although, the UK central bank isn't likely to alter its monetary policy during the current meeting and there is only one expected vote, out of total nine, favoring the change in Official Bank Rate, details of the QIR and speech of BoE Governor will direct the GBP moves as the central bankers is scheduled to present final economic forecasts for 2015. The Bank of England revised down its near-term inflation forecast during its previous QIR in August and said that the plunge in commodity prices can negatively affect the inflation reading; however, the central bank moved forth while expecting a 2.8% UK GDP growth in 2015 as compared to a projection of 2.5% in May.
Considering the deflation scenario of the UK, together with dip in Core CPI and a weaker GDP number, chances of the Bank of England to spread some dovish message are higher. However, the recent decline in inflation number was very much expected and developments in labor market details favor optimistic forecasts relating to economic growth and inflation. Hence, details of the report, coupled with the tone of BoE Governor, should be closely examined to determine near-term GBP moves. Should the Governor favors an interest rate hike in 2016 and/or the QIR prints some optimistic forecasts, chances of the GBP rally becomes brighter.
Aussie Traders Should Take Cues From RBA
Recent declines in Iron-Ore prices, Australia's main export, coupled with soft inflation numbers causes the market players to examine details of monetary policy meeting by the Reserve Bank of Australia (RBA) scheduled for Tuesday, to determine further AUD moves. Moreover, monthly details of Retail Sales and Trade Balance, up for publishing on Wednesday, can provide additional information to base AUD trades on.
The RBA is expected to stand pat on its five month old stop on altering the monetary policy and the Retail Sales are also likely to grow at the same 0.4% pace; though, the trade balance can print a cut in deficit to -2.85B versus its -3.10B prior. Even if the central bank is likely to carry its five month old monetary policy and the trade numbers are also indicating towards AUD strength, economic numbers from China, its main consumer, have continued spreading global pessimism and can become a reason for the RBA to utter some dovish words for the economy if not changing the monetary policy. Hence, either a word of caution from the Australia's central bank and/or a change in monetary policy is expected to provide further weakness into the AUD.
Details From The Rest Of The Globe
Other than the headline numbers/events from the US, UK and Australia, which are likely to govern major part of this week's moves, labor market numbers from New-Zealand and Canada, coupled with the Canadian Trade Balance, are some other details that become important to consider during the current week.
Canadian Trade Balance have continued running into deficit and plunged to the lowest levels in three months during its October release while the Employment Change rallied to the four month's high of 12.1K. Moreover, the Unemployment rate also ticked up to the highest level in more than a year in its previous mark. As the data points favor mixed economic outlook, aggression of Unemployment Rate and a higher trade deficit may provide further weakness to the Canadian Dollar (CAD); though, higher Employment Change can help limiting the CAD declines.
New-Zealand labor market details, namely Employment Change and Unemployment Rate, are scheduled for release on Wednesday and can help forecast NZD moves. While the Unemployment rate is expected to print the highest levels since May 2014, to 6.0% from 5.9% prior, the quarterly Employment Change bears the positive consensus of marking the 0.4% growth versus 0.3% prior. With the recent dip in dairy prices, coupled with Chinese pessimism, weaker labor market numbers could magnify the NZD downside.
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