It’s Nonfarm Payrolls – Is the Dollar Going to Get Another Shock?

Household spending out of Japan disappointed early. While there will be support from trade talks, the data out of Europe and the U.S will influence.
Bob Mason
NonFarm Payrolls

Earlier in the Day:

Economic data released through the Asian session was on the lighter side this morning. Household spending figures out of Japan were the only stats to consider in the early part of the day.

For the Japanese Yen,

Household spending slid by 2% in February, month-on-month, reversing a 0.7% rise in January. Year-on-year, spending rose by 1.7%, coming up short of a forecasted 1.9% increase.

According to figures released by the Ministry of Internal Affairs and Communications,

Weighing on overall household spending, year-on-year, were

  • A 6.4% fall in spending on fuel, light & water charges and a 4.9% fall in spending on education. There was also a 1.9% fall in spending on other consumption expenditures.

Supporting household spending:

  • Spending on transportation and communication rose by 6.7%, with spending on furniture and household utensils up 5.8%.
  • There were also notable increases in spending on housing (4.7%), clothing & footwear (3%), and culture & recreation (2.9%).

One factor that weighed on overall household spending, year-on-year, was a 0.8% fall in disposable incomes.

The Japanese Yen moved from¥111.648 to ¥111.644 against the U.S Dollar upon release of the figures. At the time of writing,  the Japanese Yen was down by 0.05% to ¥111.72 against the U.S Dollar.

Elsewhere,

At the time of writing, the Aussie Dollar was up 0.15% to $0.7123, while the Kiwi Dollar was flat at $0.6754 for the session.

Positive updates from China’s Premier Xi and U.S President Trump continued to support risk appetite through the early part of the day. Both China and HK markets closed are for the day.

In the equity markets, the Nikkei was on the rise, gaining 0.32%, while the ASX200 looked set for another day in the red. At the time of writing, the ASX200 was down by 0.78%.

The Day Ahead:

For the EUR

It’s another relatively quiet day on the economic calendar. Germany’s February industrial production figures are due out ahead of the European open.

Following a 4th consecutive fall in factory orders in February and the continued contraction in Germany’s manufacturing sector, anything positive would be a surprise.

In the wake of the ECB monetary policy meeting minutes from Thursday, dire numbers could raise the prospects of a near-term move by the ECB.

While we can expect the EUR to respond to the numbers, sentiment towards the U.S – China trade talks and Brexit will also be a factor.

Later in the day, nonfarm payroll and wage growth figures due out of the U.S will also influence market risk appetite.

At the time of writing, the EUR was up 0.03% at $1.1224.

For the Pound

Economic data due out of the UK is limited to March house price figures that will have a muted impact on the Pound.

Following Wednesday’s parliamentary vote in support of the Cooper Bill, the focus has turned to the House of Lords. With the debate over the draft legislation having kicked off on Thursday, a vote could be imminent and there could be a surprise.

It’s highly unlikely that the draft legislation will get passed without changes, which will then see MPs grapple to push through a bill that previously had passed by just one vote.

Chatter from the EU will also need to be monitored. Through Thursday, there wasn’t overwhelming support for a lengthy extension unless there was a justifiable reason to do so. A 2nd Referendum would certainly be something that EU member states would support…

At the time of writing, the Pound was up 0.06% to $1.3085.

Across the Pond

It’s a big day for the Greenback. Nonfarm payroll and wage growth figures will be the key driver later today. Following February’s particularly dire NFP numbers, the markets will be looking for a bounce back. Recent weekly jobless claims figures support a rebound, though will it be enough. The markets will need to see 185K plus to really be convinced…

Wage growth will likely have less of an influence this time around, following the FED’s decision to hit pause on rate hikes.

Outside of the numbers, market risk sentiment will provide direction for the Dollar ahead of the numbers.

At the time of writing, the Dollar Spot Index was down by 0.02% to 97.284.

For the Loonie

Canada’s labor market figures are due out later in the day. We can expect the Loonie to be particularly sensitive to the stats. While forecasts are for the unemployment rate to hold steady at 5.8%, it will be the employment change numbers that count…

Outside of the stats, expect market risk appetite to overshadow the stats later in the day.

The Loonie was flat at C$1.3359, against the U.S Dollar, at the time of writing.

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