The NFP is ahead of us and all eyes are on the fate of the USD. The way it declined recently and the aggressiveness of the EURUSD advance has made many traders wonder if a USD rebound is on its way..
Moreover, voices have started to doubt the USD’s reserve currency status. After all, when a dominant currency declines over ten big figures in a quarter against another currency (i.e. Euro), questions arise.
Key Economic Data in the Week Ahead
As is accustomed, the Non-Farm Payrolls (NFP) is released on the first Friday of the month. But until Friday, this week has some critical economic events that can move various markets.
Two central banks announce their interest rate level and monetary policy decisions – the Reserve Bank of Australia (RBA) and the Bank of England (BOE). Both are expected to do nothing about the current monetary stance, but that does not mean that the AUD and GBP markets will not move.
The recent AUDUSD strength above 0.70 should be a bit of a concern for the RBA. While it comes on the back of strength on the gold and US equity markets, a strengthening currency is not something a central bank wants to see in a recession.
On Thursday, just one day before the NFP, the BOE faces a similar story. The GBP gained lately against the USD and CHF, reaching critical levels – 1.30, respectively 1.20. More strength is likely to be downplayed by the central bank. Employment in New Zealand and Canada are also on deck this week, with NZD and CAD pairs likely to move more than usual.
But the main theme of the week, as suggested at the start of this article, is the USD and its direction. With only a few months until the US Presidential election, the USD is likely to be the driver of any significant market moves on the FX dashboard. Any news relative to the election process (i.e. last week President Trump hinted at the possibility of delaying elections) will strongly influence the way the USD performs.
It is customary that the market remains in range during the NFP week, in expectation of the big piece of data on Friday. However, this time it may be different because of the other data on the economic calendar, data has the potential to move the FX market.