News Column

US Dollar May Mount Swift Recovery as Jobs Data Bolsters Fed Outlook

June 5, 2014

Ilya Spivak

Talking Points:



  • All Eyes on US May's US Employment Report into the Week-End
  • US Dollar to Rise if Payrolls Increase Tops Consensus Forecasts
  • High-Yield FX May Suffer Most if US Data Bolsters Fed Outlook



    Currency markets are likely to look past a round of second-tier economic releases in European trading hours to focus on the much-anticipated US Employment data set. The report is expected to show nonfarm payrolls rose by 215,000 in May, marking a bit of a slowdown from April's 288,000 increase. The unemployment rate is expected to tick higher to 6.4 percent after dropping to a four-year low of 6.3 percent in the prior months.



    The US Dollarturned sharply yesterday in anticipation of the release, dropping 0.44 percent on average against its leading counterparts to produce the largest single-day decline in two months. Softer labor-market data threatens to cast doubt on continued normalization of Federal Reserve monetary policy, warning that the central bank may opt to slow the process of "tapering" QE asset purchases or delay subsequent interest rate hikes.



    US economic news-flow has increasingly improved relative to expectations since early April however.That hints analysts are underestimating the vigor of recovery from the downturn in the first quarter, opening the door for upside surprises. Such a result is likely to bode well for the greenback, sending the benchmark unit higher against most of the majors. Higher-yielding FX may be particularly hurt in this scenario stimulus reduction bets weigh on broader risk appetite. We remain short AUDUSD.









    Asia Session



    GMT

    CCY

    EVENT

    ACT

    EXP

    PREV

    23:30

    AUD

    AiG Performance of Construction Index (MAY)

    46.7

    -

    45.9

    23:50

    JPY

    Official Reserve Assets ($) (MAY)

    1283.9B

    -

    1282.8B

    0:00

    NZD

    QV House Prices (YoY) (MAY)

    8.2%

    -

    8.4%

    5:00

    JPY

    Leading Index (APR P)

    106.6

    106.2

    107.1

    5:00

    JPY

    Coincident Index (APR P)

    111.1

    110.8

    114.5





    European Session



    GMT

    CCY

    EVENT

    EXP

    PREV

    IMPACT

    6:00

    EUR

    German Labor Costs (QoQ) (1Q)

    -

    0.9%

    Low

    6:00

    EUR

    German Labor Costs (YoY) (1Q)

    -

    2.0%

    Low

    6:00

    EUR

    German Trade Balance (E) (APR)

    15.1B

    16.4B

    Medium

    6:00

    EUR

    German Current Account (E) (APR)

    15.6B

    19.5B

    Low

    6:00

    EUR

    German Imports (MoM) (APR)

    0.8%

    -1.1%

    Medium

    6:00

    EUR

    German Exports (MoM) (APR)

    1.3%

    -1.8%

    Medium

    6:00

    EUR

    German Industrial Production (MoM) (APR)

    0.4%

    -0.5%

    Medium

    6:00

    EUR

    German Industrial Production (YoY) (APR)

    2.7%

    3.0%

    Medium

    6:30

    AUD

    Foreign Reserves (A$) (MAY)

    -

    62.1B

    Low

    7:00

    CHF

    Foreign Currency Reserves (MAY)

    -

    438.9B

    Medium

    7:15

    CHF

    Consumer Price Index (MoM) (MAY)

    0.2%

    0.1%

    Medium

    7:15

    CHF

    Consumer Price Index (YoY) (MAY)

    0.1%

    0.0%

    Medium

    7:15

    CHF

    CPI - EU Harmonized (MoM) (MAY)

    0.1%

    0.1%

    Low

    7:15

    CHF

    CPI - EU Harmonized (YoY) (MAY)

    0.2%

    0.1%

    Low

    7:15

    CHF

    Industrial Production (YoY) (1Q)

    -

    0.4%

    Low

    8:30

    GBP

    Trade Balance Non EU (, Mn) (APR)

    -3150

    -3190

    Low

    8:30

    GBP

    Total Trade Balance (, Mn) (APR)

    -1500

    -1284

    Low

    8:30

    GBP

    Visible Trade Balance (, Mn) (APR)

    -8650

    -8478

    Low

    8:30

    GBP

    BoE/GfK Inflation Next 12 Mths (MAY)

    -

    2.8%

    Low





    Critical Levels



    CCY

    Supp 3

    Supp 2

    Supp 1

    Pivot Point

    Res 1

    Res 2

    Res 3

    EUR/USD

    1.3277

    1.3444

    1.3552

    1.3611

    1.3719

    1.3778

    1.3945

    GBP/USD

    1.6585

    1.6687

    1.6754

    1.6789

    1.6856

    1.6891

    1.6993














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    Source: DailyFx


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