US jobs report preview: could better jobs numbers derail a dovish Fed?​

With US jobs numbers improving, could Friday’s US jobs report drive the dollar higher?

Federal Reserve Source: Bloomberg

This week’s US jobs report brings further light for Federal Reserve (Fed) watchers, as the continued economic uncertainty provides volatility for traders. Coming off the back of a Fed rate-cut, most will perceive this data in the context of the outlook for further rate cuts. From an unemployment standpoint, many will see a rate-cut as unnecessary as it remains around record lows.

However, there is more to it, with this month seeing a three-year high in core durable goods orders, and a jump in core personal consumption expenditures (PCE) price inflation. We did see a second quarter (Q2) gross domestic product (GDP) figure of 2.1% come in heavily below the Q1 rate of 3.1%, yet that was above market expectations of 1.8%. Thus, there is less reason for the Fed to take a uber-dovish stance going forward. However, this week’s jobs report could play a vital role in guiding markets on the future rate path for the Fed. Thus, when the figures are released, markets will be reacting to the economic repercussions, but also what it could mean for future interest rates at the Fed.

What to look out for on Friday

When the US jobs report is released, markets will almost always react to the payrolls figure first, with many algorithms trading specifically around the strength or weakness of that figure. Last time we saw 224,000 jobs added in June, with markets predicting a figure around 170,000 for July. Next markets are likely to focus on the average hourly earnings figure, which provides markets with a proxy for future inflation. Markets expect to see the year-on-year (YoY) figure rise to 3.2% (from 3.1%), with the monthly number remaining at 0.2%. Finally, keep an eye out for the unemployment rate figure (predicted to remain at 3.7%), and the participation rate. Be aware that when you see the payrolls and unemployment rate and unemployment both rise or both fall, that is typically attributed to a shift in the participation rate.

Where now for the dollar?

Looking at the dollar, we have seen a resurgence over the past month, with the ascending trendline coming back into play once more. Tonight’s Fed meeting is likely to bring volatility, but with some of the US economic data improving there is a strong possibility that this phase of rate cuts is relatively brief. Should the Fed indicate such an outlook, we could see the dollar rise towards trendline resistance. Such a rally through the May peak of $97.86 would signal a continuation of the uptrend in play since 2018. However, questions would be asked should price reach trendline resistance. To the downside, the failure to break $97.86 could set us up for a period of downside, with the post-Fed price ability to break through this level key to setting up sentiment for the jobs report.

Dollar index Source: ProRealTime

Dollar index Source: ProRealTime


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.

Federal Reserve meeting

Find out how the Fed affects the markets ahead of the FOMC meeting taking place between 17 - 18 September 2019.

  • How might the next Fed meeting affect traders?
  • What was decided at the last Fed meeting?
  • How does the FOMC announcement usually affect the dollar?

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Bid
Offer
-
-
China 300
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.


For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.