Market Analysis

Could Thursday’s New Zealand CPI Data Set Feathers Flying In The Kiwi?

Eyes Down for US NFPs

Friday’s keynote US economic data will of course be the 1330h (London time) release of non-farm payrolls with the consensus among economists polled by Reuters for a rise of 180,000 in January after December’s sub-consensus 148,000 print. The question traders will be asking themselves is how the currency market may react. First of all, it’s important to note that any consensus forecast can include quite a spread of opinion. For example, for today’s NFP number, Japan’s Nomura Bank is expecting a 205,000 increase while France’s Natixis Bank is looking for 155,000. Nevertheless if the ballpark number being discussed is 180,00, how might the greenback respond.

Traders will understand that it’s not just the NFP figure alone that will affect the post-data price action but also how the currency market is positioned into the data. Traders might reasonably conclude that the post-FOMC price action in currency markets on Thursday was leaving the market, on balance, somewhat short of USD versus the likes of the euro and sterling (EURUSD, GBPUSD) but markedly less so versus the yen (USDJPY). Given that the FOMC was held by analysts to have a slightly more hawkish statement, the subsequent price action could infer that the bar for USD strength, at least against the euro and to an extent the pound, is currently pretty high. Traders may wish to consider that when formulating their own NFP strategy. Could it be that even a strong NFP print won’t be enough to turn the USD’s fortunes?

Written by Neal Kimberley, External Currency Analyst.