On Friday, trading on the foreign exchange market was lively. The GBP/USD currency cross struggled to hold above the 1.3550 area. This downtrend was indicative of light selling pressure throughout an apprehensive European trading calendar. Meanwhile, the EUR/USD pair remained defensive, trading in a limited range near 1.1450 as traders anticipated the release of the May US Nonfarm Payrolls (NFP) data, set for publication at 12:30 GMT.
As the European trading hours took shape, GBP/USD saw further trouble keeping it pinned in the negative. The currency pair’s performance, it seemed, was largely driven by risk appetite and sentiment expectation ahead of the upcoming NFP print. Traders are hyper focused on these economic indicators to determine what they will mean for monetary policy and, therefore, market structure going forward.
Related to GBP/USD’s weakness, the EUR/USD currency pair showed a jittery tone. Bumping against the 1.1450 level, it traded in a narrow-range box prior to one of the major risk events, the NFP data. Tight monetary policy is making investors defensive. Or they’re playing a wait-and-see game to position themselves strategically depending on where the labor market data shakes out.
These are going to be the two US data points for May that move the market the most. This new data will provide tremendous insight into our changing employment landscape and economic wellbeing. Analysts and traders alike are preparing for the report’s implications on the forex market, particularly in how it may influence the Federal Reserve’s monetary policy stance.
As if forex markets moving sharply was not enough, significant moves were taking place in equity markets. After Tesla Inc. (TSLA) stock price settled above $332 on Wednesday, it appeared that investors were enjoying a Tesla relief rally — if only for a moment. Unfortunately, that upward momentum didn’t last long. By the close on Friday afternoon, TSLA had sunk under the $274 mark, for a heavy sell-off of just over 17%.
The sudden plunge in TSLA’s stock price must give pause to investors about the company’s near-term prospects. That sell-off might be due to a combination of things, from recent overall market turbulence to the equity market’s reaction to high inflation and interest rates.
As traders work through these impacts market-driven factors, the focus is still firmly placed on foreign exchange markets and equity markets. The US NFP data will be the real game changer. More than anything else, it will determine how trading strategies and market sentiment will shape up across many different asset classes.