Payrolls report – forex awaiting the data
James Bullard turned up the heat on Tuesday but the subsequent data releases – in line ADP and slightly weaker claims on one hand, and higher flash inflation in the euro zone on the other – halted any turnaround on the EURUSD (and helped the GBP as well) leaving investors to await the key report this week to draw conclusions.
The payrolls report for March is delivered at the earliest possible date (1st day of the month) so not all other remaining indicators are available – ISMs will be released later with important employment sub-indices. From what we saw – fore mostly ADP and claims – one could expect a reading similar to the previous one when employment grew by 192k overall and 222k in a private sector.
The labor market data will play a key role within the next few months as they may encourage the Fed to eventually take some stimulus off-the table. Fed’s answer to those figures is as relevant as the figures themselves. Should the Fed signal rate hikes this year it would be clearly dollar positive and most likely not so positive for equities.
When it comes to today’s reading it may have a huge impact on the forex as well. A solid reading (200k+) may trigger some rate expectations and breaking the trend line on the EURUSD could spark some additional dollar buying spree. On the other hand, a negative to neutral reading may refocus markets back to the ECB (likely to raise interest rates next week) and pull the pair above Nov’11 highs of 1,4280 (even if this move is about to be temporary as ECB may hike rates but underline no further moves are in the pipeline).
OIL – running along the 5th wave
Following a week+ period of consolidation, prices of oil rose sharply yesterday, moving above 117 USD per barrel for the Brent. The news on Kaddafi’s advances served more as an excuse rather than a reason behind this move and now the price is running back along the 5th wave, capable of bringing it above the recent high of 119,52 USD. One needs to keep in mind that the market is extremely overbought (as indicated by speculative long positions on futures exchanges) but the downside might be realized only if there is a confirmation of uninterrupted supplies despite the political meltdown. Until this happens (some suggestions may come with IEA and OPEC reports later in the month) the price of oil might be on the rise.
Events to watch – payrolls, ISM and European PMIs
The payrolls report (8.30 ET, 14.30 CET, consensus +190k, 8,9%) is absolutely the key release not only today but perhaps with market implications for the whole month. The ISM (10.00 ET, 16.00 CET, consensus 61 pts.), while important in gauging economic trends, will have much smaller market impact. Among European PMIs, the one from UK (4.28 ET, 10.28 CET, consensus 60,5 pts.) will be more relevant as we already know the flash for the euro zone (final one to be released at 3.58 ET, 9.58 CET, consensus 57,7 pts).
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Przemysław Kwiecień PhD, Chief Economist |
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