USD: Data-heavy week shapes Fed view – TD Securities

FXStreet Insights Team FXStreet

TD Securities economists Oscar Munoz and Eli Nir anticipate a normalization in United States (US) labor data, with nonfarm payrolls at 80k, unemployment at 4.3% and modest wage growth. ISM Services Purchasing Managers' Index (PMI) is seen edging down, while JOLTS and Michigan sentiment soften only slightly. The Iran conflict and higher energy prices frame the macro backdrop, but recent Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) Price Index data suggest enough resilience for the Fed to stay patient.

Labor, services and sentiment in focus

"We expect payrolls will show a normalization in job gains, ISM services to decline again, JOLTS to move lower, and UMich to rebound only slightly (in line with last week's consumer confidence)."

"We expect payrolls to show some signs of stabilization after three volatile months, with NFP likely increasing 80k owing to 85k private gains and 5k government job losses. Healthcare, leisure & hospitality, and trade, transportation & utilities will likely support most of the improvement. The UE [Unemployment] rate should continue showing stabilization at 4.3% as well — with participation moving sideways."

"We also expect AHE [Average Hourly Earnings] to stay modest at 0.2% m/m, with the y/y moving up to 3.7%."

"We expect the ISM services index to move sideways in April, edging down to 53.7 after unwinding February’s jump, with higher energy prices weighing more clearly on survey responses."

"Data last week showed a resilient economy that allows the Fed to be patient in assessing impacts from Iran. GDP in Q1 rebounded due to a reversal of the government shutdown and stronger underlying activity. Consumption did moderate though, with faster fixed investment largely supported by AI (Artificial intelligence)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD slides below 1.3250 after failing to break through 23.6% Fibo

The GBP/USD pair meets with a fresh supply during the Asian session on Wednesday and moves away from a nearly two-week high around the 1.3275 region, touched the previous day. Spot prices currently trade around the 1.3235 zone, down 0.20% for the day, as traders look to speeches from Bank of England Governor Andrew Bailey and Federal Reserve Chair Kevin Warsh for a fresh impetus.

EUR/USD keeps losses near 1.1400 after soft Eurozone inflation data

EUR/USD keeps the offered tone intact near 1.1400 in European trading on Wednesday, pressured by softer Euronze and German inflation readings and receding bets for aggressive tightening by the European Central Bank (ECB). Traders will take more cues from the US Manufacturing PMI due later in the day.

Gold stays in red below $4,000, awaits Warsh's speech

Gold remains under selling pressure below $4,000, in the red for the third straight day on Wednesday. The Iran uncertainty and Fed hike bets support the USD, weighing on the commodity. Traders now look to Fed Chair Warsh's speech and the US data for a fresh impetus.

ISM Manufacturing PMI expected to signal continued expansion in the US

Attention shifts to Wednesday’s release of the June ISM Manufacturing Purchasing Managers Index, one of the most closely followed indicators of activity in the US manufacturing sector and an important barometer of the broader economy. Markets expect the headline index to remain unchanged at 54.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The European Central Bank Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Federal Reserve, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.