US Dollar before Non-farm payrolls Friday

Tomorrow sees a raft of US economic data which includes US Nonfarm payroll numbers. This particular release is considered an excellent barometer of the US economy but does often throw up some surprises. Expectation is for 180k new jobs to have been created outside the agricultural sector which is less than the previous reading of 227k. Any deterioration however could force the Fed to pause for thought. This is in essence the last economic release that could stop the Fed from raising interest rates. At present there is a 95% chance that the Fed will hike next Wednesday although much of this should really be priced into the Dollar exchange rate.

US employment change numbers released yesterday from the ADP (Automatic Data Processing Inc) arrived substantially stronger than expected beating estimated by over 100k. The report is often a good precursor to the official non-farm payroll numbers and the strong data yesterday would suggest we may see a big number on Friday. That 95% chance of a rate hike may have just turned into a 97% chance.

Trump impact from Job Creation

US President Donald Trump has already been quick to highlight yesterday’s job creation numbers which hit nearly 300k in the month of February. Whether this impressive job creation can be entirely attributed to his policies is another matter but nonetheless the US economy is performing well and jobs are being created. The question now is how many of these anticipated future US rate increases are fully priced into the Dollar exchange rate. With an expectation of three rate increases this year and some commentators even suggesting that four will be needed the US Dollar may have that little bit further to go. As far as GBP/USD is concerned the political fireworks next week between both the House of Commons and Lords could see the Pound rally if clarity is offered.

Before then expect a volatile end to the week with those non-farm pay roll numbers. Clients would be wise to make contact before the expected volatility in these coming days. Call us on 01494 725 353 or email me here to see how much we could save you on a timed transfer.

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