RBA fails to temper the strength in the Australian dollar as financial markets prepare for the NFP release due next Friday.
The Reserve Bank of Australia (RBA) held its monetary policy unchanged, the first important economic event of the new trading week. Because this is the first trading week of the new month, the market participants will focus on the Non-Farm Payrolls (NFP) release due next Friday.
However, the economic calendar is full of important events to consider. The week started with the RBA delivering its dovish message, as expected, but the central bank’s dovishness is not enough to impress the Australian dollar. Despite holding the monetary policy extremely accommodative and being active in controlling the yield curve, the RBA fails at tempering the strength of the local currency.
Events to Consider Ahead of the NFP Release Next Friday
The first trading day of the month began with the RBA decision and continues with the manufacturing data in the Euro area, the United Kingdom, and the United States. The market expectations are that the manufacturing sectors kept expanding in May, and the only question is on the pace of growth.
Wednesday is pretty light in terms of important events for the simple reason that the ADP jobs data, typically scheduled for this day, is postponed to Thursday. Because of the long weekend caused by the Memorial Day holiday, the ADP will be released on Thursday instead of Wednesday. The market expected that the private sectors added over 640k new jobs in May, and any meaningful deviation from the forecast is enough to trigger volatility on the US dollar pairs.
Later in the trading day, the ISM Non-Manufacturing for the month of May will show the strength of the services sector. The sector was strongly affected by the pandemic, but now that the economy is gradually reopening, it should show signs of a comeback.
Finally, the last trading day of the week is the NFP day, but also a day where both heads of the ECB and the Fed are holding a speech. Lagarde and Powell are expected to deliver a speech during a panel discussion at the Green Swan 2021 Global Virtual Conference, just ahead of the NFP data. As such, the volatility surrounding the events will increase exponentially, making Friday the most important trading day of the week.