Market Volatility on the Cards
- 1:15 ADP Non Farm Employment Claims
- 1:30 Unemployment Claims
- 3pm ISM Services PMI
- 3pm JOLTS Jobs Openings
Through the European session, we’ve seen a divergence in USD and US10Y. USD is sliding and US10Y continues to rally now testing close to 4%.
In the ever-evolving world of finance, staying ahead of the curve requires a keen eye on economic indicators that influence market trends.
Today, traders and investors are eagerly awaiting the release of key US economic data, including the ISM Services PMI, Unemployment Claims, and ADP Non-Farm Employment Change.
These figures hold immense importance as they provide valuable insights into the health and direction of the world’s largest economy.
In this article, we will delve into the significance of each data point and discuss how they could impact the foreign exchange (FX) markets.
ISM Services PMI
The Institute for Supply Management’s (ISM) Services Purchasing Managers’ Index (PMI) measures the performance of the US services sector, which accounts for a substantial portion of the country’s overall economic activity.
A higher-than-expected PMI indicates a robust services sector, signifying increased business activity, investment, and employment opportunities. Conversely, a lower PMI suggests a contraction, which may dampen investor sentiment.
In the context of the FX markets, a positive ISM Services PMI figure can enhance the attractiveness of the US dollar (USD) against other currencies.
Traders may perceive a strong services sector as a sign of economic growth, potentially leading to increased demand for the USD. On the other hand, a disappointing PMI could weaken the USD, as investors seek opportunities in other currencies.
The number of individuals filing for unemployment benefits provides a snapshot of the labour market’s strength and job creation in the US.
Lower unemployment claims indicate a healthier job market, suggesting economic stability and potential consumer spending. Conversely, an increase in claims may signify economic challenges, reducing consumer confidence and weighing on economic growth prospects.
In the FX markets, the impact of unemployment claims can be twofold. A decline in claims could bolster the USD, reflecting a positive economic outlook and heightened investor confidence.
Conversely, an unexpected rise in claims might erode faith in the US economy, potentially leading to a weakening of the USD as investors seek alternative currencies perceived as more stable.
Last week’s positive reading gave some support to the FED’s hawkish stance, and ended the recent back to back increases in claims. Another positive reading would definitely give some relief to the early selling in USD today.
With the pending news, today’s sell off in USD could present an opportunity to fade this current move.
Tip from our analyst: My preferred market will be short gold under yesterday’s low if we were to see positive US data.
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