The non-farm payrolls data in the United States has always stirred up emotions in financial markets, often leading to rapid changes, including potential strong dollar trends. However, never in history has waiting for NFP publication been so exciting as it is today.
In April, 22 million jobs were probably lost in the American economy. This would be the biggest drop since the Great Depression of the late 1920s. The spread of the new coronavirus caused a month-long quarantine in several US states, which further worsened the labor market situation. The unemployment rate is expected to reach 16 percent. According to March's data, the American economy lost over 700 thousand jobs. This was the first drop since September 2010. However, it should be remembered that the data were incomplete, as this figure excluded the last two weeks of March when the number of unemployed increased by almost 10 million. The data, which will be published on Friday 8 May at 2:30 pm, will also not cover the whole of April, but only the first half of the month.
Further behavior of the US dollar may depend on the outcome of this publication as a publication that is worse than expected could weaken the US dollar in relation to other major currencies. What is also noteworthy is that the interest rate market is beginning to value negative Fed rates. It is difficult to expect US rates to rise at this point, so the market has begun to expect them to fall below zero. However, the Fed itself excludes this scenario for the time being.
Markets, in addition to labor market data, are also currently experiencing renewed talks between the US and China. For the time being, there are many indications of a positive course of talks, which improves sentiment in the financial markets. Previously, the US had been attacking China quite strongly and blaming it for the epidemic. Now the tone of the US has been decidedly softened.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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