On Friday, traders were uncharacteristically cautious in the currency markets. They could not wait for the release of the May US Nonfarm Payrolls (NFP) data. The pound British stayed near level of 1.3550 on USD funds (GBP/USD). This uptrend found some selling pressure during the European session. The euro on the other hand vs the dollar (EUR/USD) was more timid and hung around 1.1450 defensively for most of the day.
GBP/USD looms as well The pair has struggled mightily as it remains under heavy selling pressure. The duo’s price action around 1.3550 represents a fight for direction short of a growing wave of global warming salt. Market participants are closely monitoring forthcoming data releases, particularly the May NFP figures, which are scheduled for publication at 12:30 GMT. This report is perhaps the best single report and measure of the health of the US labor market. It is beginning to have a major impact on how traders approach currency pairs.
Similarly, EUR/USD has been relatively unexciting, keeping in a tight range below the 1.1450 figure throughout the EU trading day. The currency pair’s defensive posture indicates that traders have taken a risk-off attitude ahead of the widely expected US employment figures. Analysts note that major currency pair swings often reflect the direction of the U.S. labor market. This relationship ensures that the NFP report is a primary driver of market movement.
Traders will be especially attuned to the consequences of strong NFP data. Such data would raise hopes for stronger economic growth in the United States and continue to support a stronger US dollar against its peers. Whenever employment numbers come in weaker than expected, it usually leads to a significant selloff of the dollar. Because of this, traders will most certainly recalibrate their positions.
The market is preparing for the NFP data and its effect on yields. Speculation is plentiful on how this will translate to currency valuations. Investors are closely parsing the latest economic data and monetary policy signals from central banks. All of these factors have the potential to be hugely impactful on future trade landscapes.