US Private payrolls and Fed Minutes to Guide Markets

ADP first US jobs data point of the week

The USD is higher against most major pairs as investors are reducing their appetite for risk and flock to safe havens. The JPY is the only of the majors to gain against the dollar on Tuesday’s trading session ahead of the release of the first US employment report of the week and the much awaited minutes from the Fed policy meeting in March.

ADP payrolls report will be published at 8:15 am EDT (12:15 pm GMT). The number of jobs added to employers excluding the government and farming industry is forecasted at 191,000. A slowdown of more than 100,000 form last month’s giant gain of 298,000, but still a healthy trend for US employment.

The US Institute for Supply Management (ISM) will pots its non-manufacturing index at 10:00 am EDT (2:00 pm GMT). The ISM non-manufacturing index is expected to come in slightly slower than last month at 57.1. The US crude inventories will be released at 10:30 am EDT (2:30 pm GMT). Oil prices have climbed in anticipation of a drawdown in US inventories last week.

The minutes from the March Federal Open Market Committee (FOMC) meeting will be published at 2:00 pm EDT (6:00 pm GMT). Analysts and investors will be looking through the notes looking for more insight into the Fed’s balance sheet and their plan to wind it down going forward. The US central bank wants to avoid another ‘taper tantrum’ like in 2013 so it will carefully pick what gets communicated to markets.

The EUR/USD gained 0.101 in the last 24 hours. The single currency is trading at 1.0661 as the USD gained against most major pairs after risk aversion has gripped the market and made some currencies a safer haven than others. The main topic on the global agenda is the meeting between the Chinese President and US President Donald Trump. Trade and currency manipulation could be part of the discussions, although the market expects a more amicable meeting.

European data will be scarce this week offering little support for the EUR. Last week German confidence was steady at 112.3 and this week PMIs were almost unchanged except a drop in Spanish manufacturing being offset by a gain in Italian data. Retail sales in the EU came in higher than the forecast at 0.7 percent but given the political risk due to the upcoming French elections the EUR will continue to be under pressure as investors look for safe havens.

The USD/MXN gained 0.736 in the Tuesday trading session. The pair is trading at 18.6803 as the peso fell alongside LatAm currencies. The USD gained as risk aversion gripped investors ahead of the China-US meeting in Florida and the employment data in the US to be released on Friday. US economic cada has been mixed with manufacturing slowing down as data released on Monday showed (54.2 vs 55.1 forecasted)but the trade balance deficit shrinking more than expected on Tuesday (–43.6B vs –46.0B forecasted).

The private payroll report from the ADP will mark the start of employment releases in the US with a forecasted 191,000 jobs added to the economy. The NFP at the end of the week is anticipated to bring another addition of 150,000 jobs to the economy as a whole, which could boost the USD higher specially if there is anxiety about the China-US meeting and the aftermath of the terrorist attacks in Russia.

Mexico will release its consumer confidence data on Wednesday at 9:00 am EDT and is expected to improve upon last month’s drop as the main negative factor was the Trump administration policies that could impact the Mexican economy. The tone towards Mexico has softened while at the same time other trade deals have been explored to offset the possible scenario of a hard breakup of Nafta, although in the past weeks that scenario has lost traction given the comments from the Trump administration. Timing wise the first round of $20 billion forex hedges set by the Mexican central bank will expire tomorrow.

The price of energy rose 1.078 percent during the Tuesday trading session. West Texas is trading at $50.45 as the market is expecting a drawdown in US inventories to be released tomorrow at 10:30 am EDT by the Energy Information Administration (EIA). US production is a higher concern than global supply as even the end of disruptions in Libya has not impacted crude on the downside.

Oil has managed to remain stable thanks to the efforts of the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC members who agreed to limit production seeking to bring crude from the lows seen in 2016. The strategy so far has worked, but oil producers not part of the deal, like the US, have started to ramp up production which is offsetting the boost from the OPEC deal. The production cut agreement is for six months and there have been some signs that some members would be willing to extend if it means price stability given the high compliance seen by the nations that are taking part in the deal.
Market events to watch this week:

Wednesday, April 5
4:30am GBP Services PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Meeting Minutes
Thursday, April 6
7:30 am EUR ECB Meeting Minutes
8:30am USD Unemployment Claims
Friday, April 7
4:30am GBP Manufacturing Production m/m
8:30am CAD Employment Change
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza