Trading news highlights include NFP Friday in the US and easing COVID-19 lockdowns in China spurring crude oil spot prices upwards.
The current market consensus is that the US added 320,000 new jobs in May, compared to 428,000 in April. This forecast factors in the effects of inflation and the possibility of a slowdown in job creation because of tighter monetary policy and rising interest rates.
The US economy lost ground in the first quarter in an uphill struggle against high inflation and supply-chain shortages but the job figures remained a bright spot. Whether this was the case in May will become clear on Friday. Any upside surprises could support the USD. On the other hand, if expectations are disappointed, the USD may feel the pressure while gold could be supported.
Federal Reserve tightening
US job figures influence the Federal Reserve’s monetary policy which is on the fast track to tightening. In the case that the data shows a weakening job market, the central bank could take it as a sign to slow the pace of tightening. If the numbers are relatively robust, there’s an argument for the Fed to stay on its hawkish course at the next meeting in June.
China lockdowns ease
The crude oil bulls were waiting for China to ease up on COVID-19 lockdowns and this has finally started happening. Crude oil spot prices were elevated as the trading week began and crude oil traders rapidly priced in a growth in demand for fuel. Industrial productivity in China was heavily pressured in May during the lockdowns, affecting investor sentiment and weighing on the Asian stock markets. Once this cloud has passed, the prospects for global growth could brighten, but higher fuel prices are likely to puff up the inflation balloon in the commodity markets.
Canada releases its GDP results for the first quarter. Expected to be at the level of 5.4 percent compared to 6.7 percent previously, any upside or downside surprises could move the CAD currency pairs. The CAD may also be affected by the Bank of Canada’s (BoC) interest rate decision tomorrow, Wednesday June 1. The consensus is for the BoC to hike its key interest rate guidance from 1 percent to 1.5 percent to counter the effects of high inflation.
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What are Non-Farm Payrolls?
The Non-Farm Payroll report, or NFP, is highly influential and covers the number of jobs added in the previous month. The survey is released on the first Friday of each month.
Before the report is released, financial analysts and economists share their consensus. This is an estimate or forecast and not the actual result itself, but traders can use it to inform their decisions.
Read more about the NFP Friday trading event in our educational article here.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.