What has the Fed planned for the dollar?
The US non-farm payrolls printed 236,000 jobs in March, above the 230k consensus and the unemployment rate dropped to 3.5%.
This week’s core inflation number is likely to come in at 0.4%.
So we have More jobs, less unemployment, and high inflation.
This could be Powell’s only reason for further rate hikes, although these are the last rate hikes and must favor a final 25bp Fed rate hike in May.
However the printed data was lower than expected, there were 17k of downward revisions to the past two months but on the positive side, the bulk of the jobs added were in full-time positions. For this reason, the market considered the strength of the dollar.
Fed will be in a policy pivot
All traders are waiting for the outlook for the US jobs numbers, but the statement from Fed officials indicates that they strongly insist on curbing inflation. The Market priced a 25bp hike rate for 3 May.
We consider only a 25bp hike for this week’s meeting. the Fed will indeed hike 25bp, but see the Fed rapidly reversing course later this year.
US CPI data for March will be released on Wednesday. After it, the Federal Reserve will release minutes, where officials raised interest rates by 0.25% but changed their policy rhetoric. They pointed out that the interest rate may increase. So all traders are waiting for this week’s CPI data because it could be a driver for the USD and a sign of Fed decisions.
Will the central bank of Canada reduce interest rates?
Wednesday is the Bank of Canada, BOC interest rate decision. An important day for CAD traders.
BOC, At their last meeting, decided to keep interest rates unchanged, It making Canada the first central bank to not raise interest rates in their hawkish policy cycle. The central bank of Canada announced that the latest economic data is in line with the central bank’s expectations, so we can expect no increase in interest rates for Canada this week.
BOC PRESS CONFERENCE, On Wed Apr 12, Any word that suggests interest rate cuts are coming soon could put pressure on the Canadian dollar.
Australian jobs data is the most important clue for traders
The Reserve Bank of Australia has hinted in past statements that further contraction may be needed in the future, so AUD traders should pay close attention to Thursday’s Australian employment report. We are also keeping an eye on China’s CPI and PPI data to be released on Tuesday, as China, the world’s second-largest economy, is Australia’s main trading partner and could influence traders’ decisions for the currency.
If the employment report will be weak, it could reinforce the Reserve Bank of Australia to stop interest rate hikes and could pressure on AUD.