U.S Nonfarm Payrolls Puts the Dollar Back in the Spotlight

Earlier in the Day:

It was a relatively busy start to the day on the economic calendar this morning. The Aussie Dollar and the Japanese Yen were in action early this morning, with economic data from China also in focus. Later this morning trade data from China will also be in focus.

For the Japanese Yen

In April, the Services PMI rose from 48.3 to 49.5, which was up from a prelim 48.3.

According to the finalized Markit survey,

• Output and new orders saw marginal declines at the turn of the quarter.
• Foreign demand for services declined at a faster pace than total new business.
• Job creation picked up at the most marked pace since May-2019.
• Firms remained confident that activity would expand over the coming 12-months.
• Hopes that a successful vaccination programme would stimulate a broad recovery in demand conditions supported both optimism and the pickup in job creation.

The Japanese Yen moved from ¥109.051 to ¥109.047 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.01% to ¥109.10 against the U.S Dollar.

For the Aussie Dollar

There were no material stats to provide the Aussie Dollar with direction this morning. From the RBA, however, the RBA Statement of Monetary Policy provided direction.

Salient points from the Statement included:

• The Australian economy is transitioning from recovery to expansion phase earlier and with more momentum than anticipated.
• GDP is now expected to have reached its pre-pandemic level in the March quarter 2021.
• There were also more people employed in March than before the pandemic.
• Under the baseline scenario, GDP is expected to grow by around 4.75% in 2021 and by 3.5% in 2022. Previously, growth for 2021 was projected at 3.5%.
• The unemployment rate is expected to continue to decline to around 5% by end of 2021 and to 4.5% by end of mid-2023. Previously, the unemployment rate was projected to sit at 6% by end of 2021.
• Inflation is expected to be close to 2% by mid-2023 in the baseline scenario.

The Aussie Dollar moved from $0.77787 to $0.77872 upon release of the statement that preceded trade data from China.

From China

Service PMI figures were in focus this morning.

In April, China’s Caixin Services PMI rose from 54.3 to 56.3.

According to the Markit Survey,

• New work grew at the strongest pace in 5-months, leading to a faster pace of job creation.
• Input prices rose at a solid clip, leading to firms increasing prices charged once more.
• Optimism towards the next 12-months remained elevated. Expectations that business conditions domestically and overseas will continue to recover from the pandemic drove optimism.

The Aussie Dollar moved from $0.77776 to $0.77918 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.07% to $0.7787.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.08% to $0.7240.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic data front. German industrial production and trade data are due out later this morning.

Expect plenty of EUR sensitivity to the numbers following downgrades to 2021 economic growth for Germany.

On the monetary policy front, ECB President Lagarde is also scheduled to speak later in the day.

At the time of writing, the EUR was flat at $1.2065.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. April’s construction PMI is due out for the UK.

Following the BoE policy decision and forward guidance, however, we don’t expect the numbers to have a lasting impact.

At the time of writing, the Pound was up by 0.12% to $1.3906.

Across the Pond

It’s a busy day ahead on the economic calendar. Labor market figures for April are due out later today.

Expect April’s unemployment rate and nonfarm payroll figures to be the key drivers on the day.

The markets are expecting another marked increase in payrolls…

At the time of writing, the Dollar Spot Index was down by 0.05% to 90.902.

For the Loonie

It’s a relatively busy day ahead on the economic calendar. Employment figures and Ivey PMI numbers for April are due out later today.

While the Ivey PMI numbers will influence, changes to employment will likely have the greatest impact on the Loonie.

Away from the economic calendar, market risk sentiment will remain key on the day.

At the time of writing, the Loonie was down by 0.04% to C$1.2154 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.