The Consumer Confidence report, released before of Friday’s critical Nonfarm Payrolls data, shows considerable job availability. Given the sensitivity of potential changes in expectations about the date of tapering beginning, analysts at MUFG Bank believe that Friday’s NFP report, which will be the first since the FOMC, might see an outsized move.
“The ‘Jobs Plentiful minus Jobs Hard to Get’ index jumped in yesterday’s confidence report, indicating that if labor supply issues are alleviated, the report on Friday could show a significant increase in job creation. Following the 559K gain, Bloomberg’s market consensus for May was 700K gains; the ‘whisper’ number is already at 800K, but it could well be creeping higher still.”
“A blowout report would just add to the growing likelihood of a September confirmation of tapering beginning in Q4 this year. The movements in the FX spot market indicate that short USD speculative positions are still active.”
“Expectations for a positive jobs report are building today, fueling further USD gains that might last through the employment report and possibly beyond if expectations are met or exceeded. The ADP employment report will be announced today, and the expectation is expecting a 550K gain following a much better than projected 978K gain last month. Even if the data were averaged over a two-month period, it would still point to a significant NFP on Friday.”
“While we believe the US dollar has short-term upside potential, we are less sure as the year progresses. We must remember that this tightening cycle will be significantly more internationally synchronized than the previous Fed tightening cycle, and we will likely get confirmation of this as the year progresses. Non-dollar currencies will benefit from this assistance, but at a lower level.”
Continue reading