There has been a lot of hubbub surrounding the non-farm employment report, and rightfully so. With almost 70 percent of the economy bent on strong support from the consumer sector, an ample amount of attention should be placed on the release once again. Moreover, given the recent improvements in employment through various other economic releases, this one may be a surprise.

Looking back at monthly data, initial jobless claims have been falling. Albeit not so much so to warrant any celebrations, the weekly release has come down from the plus 600K figures that the market has been accustomed to for most of the year. Secondly, manufacturing sector improvements are abound. According to last week’s ISM Chicago, the employment component increased to the highest level of the year. The national ISM non-manufacturing additionally improved, rising to the highest level since September as six industry groups saw growth. Now that’s a silver lining. And lastly, feeding some speculation of an uptick in employment is the upcoming ADP employment report. Although not an exact barometer when compared to the actual non-farm report, there has been some merit to the findings. For the month, the report is estimating a slightly lesser decline of -335K.

FX Traders Look to Policymakers for Further Indications

Source: Trading Economics

In addition, the calendar has three major central banks declaring interest rate decisions this week. Of all three, none are expected to change rates which are already at historic lows. However, currency traders will definitely be scrutinizing any follow up statements to the decision. Particularly, market speculators will look to both the Reserve Bank of Australia and European Central Bank.

Reserve Bank of Australia: (Tuesday) Rates are anticipated to be left alone at 3 percent, where they currently stand. However, with economic progress still in question, there is a possibility that RBA Governor Glenn Stevens may hint at further decisions lower. The possibility resembles earlier comments this week by the Reserve Bank of New Zealand as policy heads noted that rates could be aggressively lowered once again should the economy stall. As a result, Australian dollar strength should continue, aside from any mentions of further accommodative policy.

European Central Bank: (Thursday) With regards to the ECB, the question still remains as to whether or not central bankers remain concerned about non-existent inflationary pressures. According to recent economic and governmental reports, it is very clear that price increases have stabilized, even turning back slightly in several regions of the EU. This fact should pave the way for the central bank to lower rates in order to boost productivity and spending. However, as has been the case in the recent past, President Trichet and company will likely remain fearful of latent inflationary pressures, expected to peak at a whopping 2 percent (incidentally remaining within the central bank’s mandated target range). Expect any mentions of interest rate easing to minimally help the EURUSD lower.

Bank of England: (Thursday) There is nothing that needs to be said in the UK, aside from hints on further quantitative easing. Should any mention of further cash injections enter any accompanying statement, bearish players will likely be set to pounce on cable.

Tags: aud/usd, Central Bank, Euro, gbp/usd, Non-Farm Payrolls, unemployment, US Dollar

This entry was posted on Saturday, August 1st, 2009 at 10:53 pm and is filed under Australian Dollar, British Pound, Currency Trading, Economic Indicators, Euro, US Dollar. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.