Data on NFP, Brexit and negotiations between US and China

5 Apr 2019

Data on NFP, Brexit and negotiations between the United States and China

Bank of India lowered the rate yesterday, what provoked the sale of the Indian rupee in the foreign exchange market. So those of our readers who followed yesterday's recommendation to buy USDINR should have made good money.

The US and China continue to generate positive news about progress in trade negotiations. The president of China announced significant progress. But there is no final version of the contract.

Brexit news. From the progress can be noted just the next vote in the Parliament of Great Britain, against the exit without a deal. We look forward to the progress of May, which should consist in requesting a delay from the EU and the duration of this delay. In addition, we observe how the cooperation with the opposition leader Corbyn will end. New idea of May to hold a referendum on the conditions of Brexit still does not find support in the Cabinet of Ministers, but this is another option that needs to be borne in mind. Our trading tactics are unchanged - we buy a pound on descents.

Yesterday’s data from the Eurozone was not pleasing unlike Wednesday. We are talking about statistics on production orders in Germany. The indicator literally fell by 8.4% (y / y), which is the strongest fall since 2009. No wonder the optimism of euro buyers has abruptly subsided.
But today the EURUSD can receive an upward impulse not because of data from the Eurozone, but from the USA. Today will be published one of the most important statistics on the United States for the month - statistics on the labor market. After the failure figures on the NFP last month (+ 20K with the forecast of + 180K), the indicator is expected to be rehabilitated this month (forecast + 175K). If the data again comes out weak, it will be possible to talk about the trend, and it is extremely alarming and negative for the United States. In general, the chances of achieving the forecast indicators are quite high (if only because the forecast corresponds to the monthly average NFP numbers over the last couple of years). Nevertheless, ADP data published on Wednesday, alarming (the smallest number of jobs in 18 months). And the United States recently could not boast with data (retail sales this week are worse than forecasts and in the negative zone, GDP is revised downwards, etc.).

As a result, we are committed to selling the dollar today. But ideally, of course, wait for the numbers on the NFP. Because the data is better than the forecast and may well trigger a growth in demand for the dollar. At the same time, weak data will most likely trigger dollar sales. Recall that the case is not only in the state of the US economy as such, but also in the monetary policy of the Fed. Weak data will be a clear signal not only about the unreasonableness of raising rates in the foreseeable future, but will also signal the Central Bank in favor of lowering the rate to boost economic activity.