Originally published by AxiTrader
Tonight sees the release of the latest update of global market's most important monthly economic data point - US non-farm payrolls.
US labour markets have been the key bright spot in the economy as the labour market tightens and unemployment has dropped to a post-crisis low of 4.4%.
Expectations are high for another solid result for the May non-farm payrolls when it is released at 10.30pm AEST tonight (8.30am NYC, 1.30pm LDN) with pundits forecasting a rise of 185,000 jobs.
But there is every chance the whisper number that traders focus on might have snuck a little higher after last nights ADP payrolls data for May so comprehensively beat expectations of an increase of 180,000 with a bumper print of 253,000 jobs for the month.
HERE'S THE SET-UP
Data:
- In April NFP printed a stronger than expected 211,000 with unemployment ticking down one-tenth of a point to a post-crisis low of 4.4%.
- That print was a sharp snapback from the much weaker than expected print of 79,000 for March. It also mean that 3 of the first 4 months of 2017 printed non-farms payrolls of more than 200,000.
- The unemployment rate of 4.4% was the lowest since May 2007 and 0.4% below January's 4.8% and a solid improvement on the 5% unemployment rate of April 2016.
- While the average of the Reuters survey for tonight's release is 185,000 the highest forecast is 235,000 and the lowest is 140,000. These levels form the parameters around which a "shock" number would need to print outside to really move the currency and bond markets.
- Whatever the print tonight, even a very weak one, the Fed has signalled that it believes the labour market is tightening and that rates will be increased again at the next FOMC meeting on June 13-14.
- Worth noting though the original print for May 2016 NFP was 11,000. There is no reason to expect a rerun of that print. But it's an interesting anecdote.
- Earnings data is also important and forecasters are expecting average earnings to rise 0.2%. A big departure from this - in either direction - will be important.
MARKETS:
- The US dollar, in index terms is trying to base around 96.75/97.00. whether the recent respect for this level has been the calm before the next storm or rather a base on which to build will be heavily influenced by the NFP print tonight.
- Euro has a similar resistance zone near the recent highs around 1.1270 it, and the election night high of 1.1299 are the key levels to watch on the topside.
- Bond rates have been important for the US dollar recently. Indeed the US 10-year bond rate has been the single best indicator of dollar direction for some time now. With US 10's just above important support at 2.18% this is the level to watch. A fall through here would undermine the dollar.
Have a great day's trading.