The March 2021 NFP week just started with the U.S. dollar higher across the F.X. dashboard. The greenback trades with a bid tone on the back of more easing from central banks other than the Fed. Higher long-term yields brought unwanted financial tightening, and the world looks for safety in the U.S. dollar.
The week ahead is full of important economic events, but the focus remains on the last trading day of the week when the NFP – Non-Farm Payrolls is released in the United States. Anything else pales in importance, as traders will look for clues about the state of the American labor market.
Focus on the U.S. Dollar
The American dollar rose over two big figures (i.e., two hundred pips) against the euro, the British pound, or the Australian dollar in the last two trading days. If the trend continues, the reaction to the NFP data on Friday may be decisive for the medium-term evolution of the U.S. dollar.
The ISM Manufacturing PMI is the first important piece of economic data this week. The market expects a strong release, 58.7, and the employment component will tell us much about the sector’s ability to create jobs.
Early in the next Asian session, the Reserve Bank of Australia (RBA) will release its statement. The Australian dollar was one of the strongest currencies during the pandemic, and the RBA is not happy with this development, especially that some commodity prices corrected recently. The Australian and Canadian GDP on Tuesday are market-moving events for commodity currencies, such as the AUD and CAD.
Wednesday is the day when the Annual Budget Release in the United Kingdom will impact the British pound. The pound dropped against the U.S. dollar recently but remains strong while having the 1.40 level in sight.
The private payrolls (i.e., ADP), the ISM Non-Manufacturing, and the unemployment claims on Wednesday and Thursday will give further clues about the NFP release. Also, Thursday in the afternoon, Jerome Powell, the Fed’s Chair, will give a speech about the U.S. economy at an event organized by the Wall Street Journal. Because audience questions are expected, his words may move the markets.
All in all, it should be a classic NFP week. That is some consolidation on the main currencies in the first days of the week, followed by the all-important NFP Friday.
However, the wild card comes from the long-term yields. If we see further upside, a dollar tantrum may push the greenback even higher.