This week the most anticipated fundamental market event will be the Nonfarm Payrolls data release. According to the forecasts of economists, even if the NFP figures are relatively modest, it will not stop the strengthening of the American currency in relation to all of its main competitors.
All this week the markets will look closely at the emerging data to figure out how the labor market feels itself. So far, we have weekly releases on applications for unemployment. On the one hand, they stay not too far from the lows of 40 years, this applies to the number of initial and repeated requests.
At the same time, there is more and more evidence that the lowest point of these indicators has already been passed. Around mid-November figures of the number of primary and repeated requests has been steadily going up. According to the observations, it means that the December’s increase of jobs created would be no higher than in November.
The average market forecast for Nonfarm Payrolls is 175 thousand after 178 thousand in November, although we tend to believe that the numbers may be around 150 thousand. But this is good, as indicates the fact that employers are increasingly coming into the fight for good stuff, which, in turn, is obliged to spur the growth of salaries.
Thus, a relatively feeble performance in increasing in the number of jobs must not affect the Fed's intention to tighten policy in connection with the rapid rise of salaries. If this will happen, the impact on the dollar is relatively limited: an initial decrease in short-term will be very quick.
If the number of jobs and wages will show momentum’s weak, then, in that case, we should expect a real correction of the US currency with the possibility of growth of the EURUSD above 1.06 level, as it was on December 30th.
However, the scenario with the continued growth of USD looks much more realistic.