Today’s Non-Farm Payroll data is drawing traders’ attention and could have a significant impact on sentiment and could affect monetary policy expectations.
The US labor market has remained resilient until now despite tightening financing conditions and restrictive monetary policy. However, expectations lean toward some deterioration.
While the pause in interest rate hikes, as the Federal Reserve left its policy on hold for a second time, has helped improve the appetite for risk among investors, they could remain cautious before the release of the NFP data.
The latter could impact the performance of the US stock market which has been able to rebound this week and add high volatility to the USD currency pairs.
PMI and ISM data could also fuel volatility in both stocks and the forex market. The US dollar has been weaker while treasury yields slid from their peak during the last two days in reaction to the Federal Reserve’s stance. The latter could be at the end of its rate hiking cycle although the possibility of another rate hike remains open.
A positive NFP headline print coupled with strong wage inflation data could boost expectations for a rate hike in December.
This would in turn provide support to the US Dollar and US Treasury Yields while potentially dampening the recent rally in stocks. Conversely, weaker-than-expected data could lead to more corrections for the US Dollar and US Treasuries yields, while stocks may extend their rebound.