April Non-farm payroll, RBA rate decision and more

2 May, AtoZForex, Lagos – Last week, we saw some amazing movement in some major currencies like the US dollar, Australian dollar and the Japanese yen. The USD was hit by the double impact of disappointing data, as well as the Federal Reserve’s decision to keep rates on hold. After the Federal Open Market Committee’s (FOMC) decision to leave interest rates on hold, the dollar continued bearish, falling to an 11 month low as the decision implied a hawkish surprise in a dovish story.

Resuming the new week/ month, UK and Chinese banks will be closed today, Monday as they observance of the May day. Through out the week, a number of other bank holidays will be observed in other regions. However, being the first week of a new month, we have several high impact news scheduled for release this week from various regions.

USD still under pressure

The US GDP report released last week also points to the inherent weakness in the US economy, which should keep the dollar lower for now. The US Q1 GDP showed a 0.5% growth. Depicting the U.S. economy expanded in the first quarter at the slowest pace in two years. Much of the weakness can be attributed to a fall in consumer spending as US consumers reduced spending and companies tightened their pockets as well. All in response to weak global financial conditions and a plunge in oil prices.

Yen surged after BoJ inactivity

The yen strengthened across board, gaining over 300 pips against the dollar on Thursday. All thanks to the Bank of Japan’s (BOJ) decision to hold off further stimulus. As the BOJ Governor Haruhiko Kuroda  and his cohorts decided to observe the impact of negative interest rates more before moving further. Many expected instead that the BOJ will alter its current policy, due to the recent strengthening of the yen, which has negatively impacted prospects for higher wages and investment.

Australia rate decision

After last week’s disappointing consumer price index data (CPI), the Aussie saw a large dip after the country’s quarterly CPI unexpectedly dipped into negative territory to -0.2%. The core inflation showed a slow down to the weakest on record as prices fell sharply last quarter, putting interest-rate cuts back on the central bank’s radar. Markets now seem to be pricing in a 50% chance of a rate cut. Hence, we are up for some volatility of the Aussie because both a failure to raise cut rates and a rate cut are both likely to move markets.

The annual budget release due a few hours latter is also likely to add impetus to the Aussie move. On Thursday, the country’s retail sales m/m and trade balance figures are due for release. While the RBA Monetary Policy Statement will be released on Friday. The Aussie is up for some serious volatility this week. Technically, it looks likely to break to the down side, following up from the bearish close last week.

April Non-farm payroll report

Stepping into the new week, FOMC Member Dudley is due to deliver a speech  titled “Market and Funding Liquidity: An Overview” at the Atlanta Federal Reserve’s Annual Financial Markets Conference. Considering the recent policy stance of the Fed, this could be a potential market mover if he drops any clues regarding the potential for June rate hike. The highlight of the week however, is the April Non-farm payroll report as the Fed is now clearly more data dependent.

The job sector remains one of the strong points of the US economy at the moment. The unemployment rate is forecast to remain at 5.0%. While the NFP is expected to show 206k jobs added in the last month. Other key data from the US include the ADP Non-Farm Employment Change, ISM Non-Manufacturing PMI and crude oil inventories due on Wednesday. Not forgetting the weekly unemployment claims report due on Thursday. The dollar fell 2% last week. Results from these reports will however determine the fate of the dollar going forward.

Canada Employment Change

The Canadian dollar has been on a relentless bullish run against the USD this year so far. The CAD seems to be riding on the recent strengthening of oil prices. The employment change is forecast to show a 0.2k change in the last month. While the unemployment rate is expected to show a 0.1% increase to 7.2%. Such disappointing data could serve as a catalyst for a bullish reversal of the USDCAD trend, considering that the pair is looking exhausted from the extended bearish run. The country’s Trade Balance figure is also due on Wednesday.

Other important data due this week include the UK Manufacturing, Construction and services PMI on Tuesday, Wednesday and Thursday respectively. It is no doubt going to be a highly volatile week in the currency markets.

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