This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The better-than-expected unemployment claims reading from the US also helped sentiment, particularly in the risk space. Unemployment claims dropped to 331,000 which was slightly lower than the 335,000 the market was expecting. For the non-farm payrolls reading tonight, the market is looking for a bounce to 180,000, which is a sharp improvement from the 74,000 recorded last month. Unemployment is expected to remain steady at 6.7%, but some analysts feel participation might drop given the expiry of some extended unemployment benefits. This would lead to people exiting the labour force and artificially drive the unemployment rate lower. Even an in-line reading on the payrolls front today could see the USD extend its gains given the impact it’ll have on confidence.
Non-farm payrolls will be in focus
AUD/USD has been in focus in Asia today as investors dissected the RBA’s quarterly statement of monetary policy. The reaction to the statement has been quite confusing as the pair initially gained some ground before retreating shortly after. The key takeaways were that the RBA revised its forecasts for the economy and inflation higher, with the recent drop in the AUD aiding the changes. While the RBA has raised its inflation expectations in the near term, peaking in the middle of 2014, it expects this to taper off in the latter part of the year. However, the real challenge will be in the jobs market and wage pressure with unemployment expected to continue to edge up. With that in mind it seems there is some doubt in traders’ minds at the moment about fuelling the long AUD trade further. Focus will now switch to the USD side of the equation where the crucial non-farm payrolls reading has the ability to cause significant volatility in the risk space.