This week the market’s sights will be focussed around the global reserve currency the US dollar. Data will start light on the US front slowly building over the week in importance ending with key monthly employment readings Friday.
Last night saw some decent data for the greenback, home sales were up month-on-month, reducing the decline in home sales year-on-year. There was also positive manufacturing data from the Dallas region, following from preceding positive readings from the Richmond and Philadelphia regions.
Wednesday evening we will have GDP from the US, however expectations are not too ambitious and we may see a beat. This will lead into the Federal Reserve’s Open Market Committee Rate Decision Thursday morning. The US has been reducing its asset purchases of late which should continue and rates should remain low at 0.25% as they have for quite some time. What will move the market will be the market’s interpretation of the rhetoric provided from the Fed’s accompanying statement in relation to future monetary policy.
More manufacturing data is due US Friday then leading into the all important and highly watched Non-farm Payrolls Friday evening. Expectations are for a decent increase in employment with average estimates of 210,000 jobs added for the month of April. Also of note will be the participation rate and hourly wage increases.
Strong employment figures should support the US dollar especially if there has been rhetoric from the Fed that the economic climate is improving in the US. This would likely lead to speculation the Fed may be closer to allowing the US dollar to appreciate, reducing the emergency monetary policy which has been in place since the GFC. However, we will have to see how these events unfold over the week and negative data could have the reverse effect.