The USD has been taking big hits in recent trade as lower oil prices have led many to believe that the FED acted rash in increasing rates and back tracking on future rates by the FED has made sure that a dovish sentiment regarding the US has crept into the markets. The Fed is expected to push back the time line for increasing rates and will remain visual of inflation and labor data to plot their course. Today’s NFP will be the largest determinant on how the rest of the trading month will play out. with inflation expectations seriously hampered due to sliding oil price, this month’s Non-farm Payrolls, expected at 189k, will be the USD`s last hope to regain its composure if they are better than expected.
Alongside NFP, traders will also be watching another number taking center stage of late, given the low inflationary environment, and that is the Average Hourly Earnings m/m (expected at 0.3%). Better than expected numbers might suggest that the economy is shrugging off the impact of oil prices as the workforce command a higher salary and are more likely to spend and stimulate inflation.
Other data form the US includes the Unemployment Rate expected at 5% and the Trade Balance expected at -42.9B.
The BOE was rather dovish in their inflation outlook and stated that 9-0 voted to maintain rates, an increase from the previous 8-1 vote at the last meeting. Furthermore, the BOE cut their growth forecast for 2016 and 2017 sighting global factors as a concern. The only straw left for GBP bulls was that the next move, when it comes, will be a hike and not a cut.
Major data out of Canada today will be closely watched by traders who have seen the CAD gain significant strength in the last few weeks in the light of stabilizing oil prices. The USDCAD just tested the 100 daily EMA which promises to be strong support going into today’s data.
- Employment Change expected at 5.2k
- Trade Balance expected at -2.2B
- Unemployment Rate expected at 7.1%
- Ivey PMI expected at 50.3
Better than expected data will see the CAD continue to gain ground as signs of improvement give hope to CAD bulls. However, worse than expected data will see the long term demise of the CAD continue and traders will be looking to add end of day and end of month puts on the CAD as they expect the USDCAD to increase.