US Jobs Report To Determine The Trend For US Dollar

Last week’s divergent performance against other major currencies lead the overall US Dollar index (I.USDX), that tracks US Dollar’s performance against other major currencies, to gain roughly around 0.5% in November.

With the Federal Reserve in the midst of deciding when to start scaling back its massive economic stimulus program, a flurry of economic data from the US economic calendar in the week ahead might provide some clarity over the uncertainty regarding the timing of the Fed tapering and could prove to be a deciding factor for near-term direction of the US Dollar

Considering the Fed’s decision to eventual tapering will be made meeting-by-meeting, depending on the incoming economic data and labor market conditions, investors are gearing up for the release of the most critical and closely watched US jobs report, popularly known as Non-farm payrolls (NFP), for the month of November. US monthly jobs report for the month of November, a top economic indicators from the US, scheduled for release on Friday, remains the spotlight of this week’s economic events from US. The jobs report is expected to show an addition of 184,000 new jobs in November, down from 204,000 jobs in October, while the unemployment rate is seen dipping to 7.2% from 7.3%.

Meanwhile, Wednesday’s ADP report, which is viewed as a guidance to and precedes the official monthly jobs report, is expected to show an addition of 174,000 private-sector jobs in the month of November, up from 130,000 jobs added in October.

Other important economic reports, including the ISM manufacturing and non-manufacturing PMI figures, scheduled for release on Tuesday and Thursday respectively, along with the trade balance data on Wednesday and revised numbers for third-quarter US economic growth on Thursday, are likely to act as the supporting cast for an optimistic view of the ongoing US economic recovery.

Market participants will keep a close eye on all these economic indicators. Mixed readings from various US economic indicators is likely to add to the uncertainty over the timing of Fed beginning to reduce its stimulus. However, a stronger NFP data would confirm labor market recovery and would increase the possibilities of the Fed deciding to taper its $85 billion monthly asset purchase program, perhaps as early as December, establishing a broad US Dollar up-trend in the medium-term.

In addition to the US jobs report, market will focus on monetary policy decisions from the Reserve Bank of Australia (RBA), European Central Bank (ECB) and Bank of England (BoE).  Also, the third quarter GDP and trade balance data from Australia, along with the PMI figures from UK will be on investors watch-list for this week.

Friday’s data that showed increase in the Euro-zone inflation (rising 0.9% in November from 0.7% in October), is unlikely to prompt ECB to announce any follow-up rate cut on Thursday.

Meanwhile, in view of the upbeat economic indicators from the UK, markets are not expecting any policy action from BoE on Thursday. This week’s UK economic calendar also features key PMI readings for the month of November. The manufacturing PMI data is scheduled for release on Monday, Tuesday’s key event include construction PMI and release of services PMI is scheduled on Wednesday.

Status-quo monetary policies would support EURUSD and GBPUSD continuing with their recent positive momentum. However, any big up-move is likely to be restrictive ahead of Friday’s US jobs report.

Meanwhile, RBA on Tuesday  is widely expected to hold its key benchmark rates unchanged. Other notable economic release from Australian economic calendar, that could have any material impact on the Australian Dollar, includes Retail sales, schedule on Tuesday; third quarter GDP data, scheduled for release on Wednesday; and Trade Balance data, scheduled on Thursday. Weaker-than-expected readings would continue to weigh on AUDUSD, that registered a fifth weekly decline in last six weeks.

Original Article: Admiral Markets