NFP May Report Might Push Greenback Lower
Analysts warn against taking the USD’s rally on Friday as a sign of its long-term recovery. The greenback has been struggling lately, and, despite its brief rise at the end of the week, there will be no change in its direction. Now analysts are waiting for the Non-Farm Payroll Report set to be released next Friday and predict that a reading below 465 000 will open the door for the USD’s further decline.
No turn in fortunes for the dollar is on the horizon. Demand for non-dollar currencies will be maintained together with positive risk. The selling of the yen will continue. The meeting of OPEC and its allies scheduled for next week will be supportive for the prices of oil and, consequently, for the prices of oil-related currencies.
Meanwhile, investors are awaiting the latest NFP report for May. The greenback has been weakening since the release of the worse-than-expected NFP report for April. In addition to depriving the US dollar of strength, the April NFP report has decreased investors’ expectations that the Federal Reserve would raise rates next year. Market participants do not entertain high hopes for the upcoming May NFP report, since they expect job gains of just over 600,000 compared to over 1 million predicted ahead of April report. It may be that investors, not harboring high expectations, will not be disappointed next Friday, but the consensus forecast still remains above monthly job gains of around 450,000.
The USD has gradually declined over the past month, after the release of the NFP report for April. Analysts, therefore, view the Non-Farm Payroll Report as becoming more important in determining the greenback’s direction. They think that job growth should be much higher, closer to 1 million a month, to strengthen rate hike expectations and push the US dollar up. If job growth continues at the low pace of 465,000 or lower, as has been so far, it will debilitate the USD even further in the near future.