Forecasting the upcoming week: US labor market takes center stage after hawkish Fed split

Agustin Wazne FXStreet

The first full week of August will test whether the US Dollar can recover from its sell-off during the last week of July as investors shift their attention from central bank decisions to a fresh round of economic data. The spotlight will be on July's Nonfarm Payrolls (NFP) report, while ISM surveys, ADP Employment figures and JOLTS Job Openings will offer additional clues on the strength of the US economy.

In Europe, investors will assess whether inflationary pressure is beginning to ease through Producer Price Index (PPI), Retail Sales and Factory Orders data. Meanwhile, China will release key PMI and trade figures that could influence commodity-linked currencies, particularly the Australian Dollar.

The US Dollar Index (DXY) is trading near 99.90 and will take its main direction from Friday's July employment report. Markets expect the economy to add 91K jobs, following June's 57K, while the Unemployment Rate is forecast to edge up to 4.3%. Before then, ISM Manufacturing, ISM Services, JOLTS Job Openings and ADP Employment will provide important signals on labor market momentum and economic activity. Stronger-than-expected figures could reinforce the Fed's hawkish bias, while softer data may revive expectations of policy easing.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.06%	-0.14%	-0.29%	0.03%	-0.19%	-0.21%	0.35%
EUR	0.06%		-0.09%	-0.22%	0.08%	-0.14%	-0.17%	0.41%
GBP	0.14%	0.09%		-0.15%	0.17%	-0.06%	-0.10%	0.50%
JPY	0.29%	0.22%	0.15%		0.36%	0.14%	0.10%	0.68%
CAD	-0.03%	-0.08%	-0.17%	-0.36%		-0.21%	-0.25%	0.33%
AUD	0.19%	0.14%	0.06%	-0.14%	0.21%		-0.04%	0.53%
NZD	0.21%	0.17%	0.10%	-0.10%	0.25%	0.04%		0.59%
CHF	-0.35%	-0.41%	-0.50%	-0.68%	-0.33%	-0.53%	-0.59%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The EUR/USD pair is holding onto gains near the 1.1530 price region. Next week's outlook will be driven by a busy economic calendar. Monday brings June Retail Sales and final Manufacturing PMIs, while Wednesday features Services PMIs and Producer Price Index data. German Factory Orders and another Retail Sales release later in the week will offer further insight into domestic demand and industrial activity. Sticky inflation combined with resilient activity could continue supporting the Euro, although stronger US data may cap EUR/USD upside.

The GBP/USD pair is trading near 1.3480 as it closes the week. The United Kingdom (UK) has a relatively quiet calendar, leaving GBP/USD primarily driven by US economic releases. As a result, the pair may remain highly sensitive to ISM surveys, ADP employment and Friday's Nonfarm Payrolls.

USD/JPY ends July near the 159.10 level after intervention suspicion. In Japanese markets, the focus is on June Labor Cash Earnings and the Bank of Japan's (BoJ) Monetary Policy Meeting Minutes. Investors will look for additional evidence that wage growth remains consistent with the BoJ's tightening path following last week's policy meeting. Any signs of stronger wage inflation could provide additional support for the Japanese Yen.

AUD/USD trades near the 0.7040 level. The AUD/USD pair will face an important week as China publishes Caixin Services PMI and July trade data, both closely watched given Australia's strong trade relationship with China. Domestically, Australia's Trade Balance will provide another update on external demand. Positive Chinese data could support the Australian Dollar, while weaker figures may revive concerns over regional growth.

Gold ends the week near $4,050 on a lower note. Investors will closely monitor US labor-market data and Treasury yields throughout the week. Strong employment data would likely support the US Dollar and yields, limiting Gold's upside, while weaker figures could revive demand for the precious metal.

Author

Agustin Wazne

FXStreet

Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.

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