US Dollar Before The NFP

As expected, on Thursday the ECB kept the key interest rate at 0%, and monthly asset purchase volumes – at the level of 30 billion euros. The deposit rate remained at the level of -0.4%. The ECB also said it will continue buying bonds until September, “or longer, if necessary”, and that key interest rates will not rise “for a long period of time”.

The euro fell after this decision. ECB President Mario Draghi’s remarks at a press conference that followed the publication of the rate decision, about slow inflation and fears of new US import duties also contributed to the weakening of the euro.

On Friday, the Bank of Japan will hold a meeting. As expected, the Bank of Japan will also refrain from any changes in its extra soft monetary policy.

The focus of traders on Friday will be the publication (at 13:30 GMT) of data from the US labor market.

It should be noted that published on Wednesday, the monthly report of ADP on employment in the private sector of the US economy, pointed to an increase in the number of employees in February (+235,000 against the forecast of +195,000 and +244,000 in January). Although the ADP report does not directly correlate with Non-Farm Payrolls, however, it suggests that a report from the US Department of Labor on employment will also be strong.

It is expected that the number of jobs outside agriculture increased in February by 204,000 (the previous NFP was +200,000). This is significantly higher than the average for six months of 166,000. Unemployment is expected to decline in February by 0.1% to 4.0%, which is the lowest value for 17 years. Moreover, many economists expect that during 2018, unemployment in the US may fall below 4%. This has not been observed since 2000.

The strong US labor market is becoming the most important driver for the growth of the US economy.

Low unemployment indicates the growth in demand for labor resources for US companies, which, in turn, will contribute to the growth of salaries for employees. And this will lead to an increase in consumer spending, GDP and inflation, which the Fed is so eager for.

In general, the dollar showed a fairly steady growth on Thursday. The dollar index DXY, reflecting its value against the basket of 6 other currencies, rose on Thursday by 0.6%, again exceeding the 90.00 mark. This week will be the third, which DXY closes in positive territory, if on Friday the index will remain above the level of 90.00.

Probably, the dollar will continue to strengthen, consolidating its growth, observed on Thursday.

Nevertheless, it is worth to be extremely careful when trading in this period of time. Often, the market response to the publication of data from the US labor market is unpredictable and contradictory. Despite the fact that aggressive traders consider the day of publication of the NFP a “payday”, more cautious traders prefer to be out of the market at this time. And this is also a trading position. Better, as they say, do not earn anything, than much to lose.