The first report this year on the number of people employed in the non-agricultural sector of the US (Nonfarm Payrolls) as always promises to be a major fundamental economic event of the week. Although in the light of the recent shock on the world commodity markets, caused by the fall in the index on the Shanghai Stock Exchange, this fact is not so obvious.
We believe that the US dollar is likely to find support in the tomorrow’s report. Despite the fact that our forecast figures for December Nonfarm Payrolls varies between 150.000 and 200.000, lower than the previous value of 211.000, we think that the US currency presently is being strengthened after the recent decision of the Federal Reserve to raise interest rates.
It is worth recalling that the US Fed made it clear that it intends to continue to pursue a policy of a gradual increase in the key rate, which is already laid in the markets a very strong momentum to support the dollar, which, in turn, reduces investors' stringent requirements and expectations for the Nonfarm Payrolls data. In principle, now for the growth of the US currency, it will be sufficient to have figures even under 200.000.
Also, do not forget that at the same time several additional factors contribute to the strengthening of the USD. They include: a global trend of oil prices declining, a positive decision of the US Congress about the lifting of the ban on the export of American oil, slowdown in China's economy and the euro area, the decision of OPEC to maintain current levels of oil production, as well as the general geopolitical instability.
What Do Others Think?
“The USD will likely find support in Friday's NFP report. Average job creation of 150k or more during the next few employment reports should be consistent with a gradual increase in the fed funds rate. Therefore, taking into account the expectations of a creation of 225k jobs in December (consensus: 200k), the USD is expected outperform,” Barclays analysts say.
"We do not think that there will be much more new information from that received in the press conference; therefore, the market effect should be limited", they added.