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TALKING POINTS – US DOLLAR, JOBS DATA, AUSTRALIAN DOLLAR, YEN

  • US Dollar may retrace some recent gains after April jobs data
  • Australian Dollar higher after RBA upgrades inflation outlook
  • Yen up while Asia Pacific stocks fall as Mnuchin visits China

A lackluster offering of European economic data is likely to see currency markets focused on April’s US labor-market data through the end of the week. The economy is expected to have added 192k jobs last month, marking a spirited rebound from the meager 103k increase recorded in March. The unemployment rate is seen falling to 4 percent, the west since December 2000.

On balance, traders will likely be more interested in the pace of wage inflation – where the on-year rate is expected to remain at 2.7 percent – than headline job creation metrics. The Fed has all but declared victory on reaching its goal of “maximum employment” some time ago, putting the second objective of doing so in a context of “price stability” front and center as the driver of policy decisions.

From a practical perspective, the path of least resistance probably leads lower for the US Dollar in the data release’s aftermath. It is hovering near a four-month high after a steep upshift in the Fed rate hike outlook. Wages would probably need to post an improbably large upside surprise to inspire strong follow-through in the near term. Rather, profit-taking may nudge the greenback lower after event risk has passed.

The Australian Dollar outperformed in Asia Pacific trade, rising after the RBA upgraded its inflation outlook and said higher rates are likely to be appropriate “at some point”. The Japanese Yenalso traded higher as regional shares declined, offering a boost to the standby anti-risk currency. Anxiety about US trade negotiations with China may have been a catalyst as Treasury Secretary Mnuchin visits Beijing.

See our quarterly FX market forecasts to learn what will drive prices through mid-year!

ASIA PACIFIC TRADING SESSION

US Dollar May Retrace Some Recent Gains After Jobs Data

EUROPEAN TRADING SESSION

US Dollar May Retrace Some Recent Gains After Jobs Data

** All times listed in GMT. See the full economic calendar here.

FX TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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