© Archyde.com. How does the US labor market data affect the strength of the dollar?…an expected scenario!
Arabictrader.com – The currency markets will follow with great interest the issuance of the US labor market data during last December, which will have a very strong impact on the US dollar trading once morest other currencies, in addition to its expected strong impact on the stock markets, metals and digital currencies. Here is a look at the upcoming data and how it affects On dollar trading:
First: A look at the US labor market during last November:
The US labor market data came positive during last November, as the economy added regarding 263,000 jobs, while it was expected to add regarding 200,000 jobs only, following the economy had added regarding 284,000 jobs last October.
Meanwhile, unemployment held steady around 3.7% for the same period, in line with market expectations and the previous reading. Wages also recorded a growth of 0.6% during the same period, higher than market expectations at the time that wages would grow by only 0.3%. This data had a strong and clear impact on the dollar once morest other currencies.
Second: Evidence for the upcoming US labor market data:
During the previous period, many economic data were issued, which may give an indication of the negative performance of the US labor market data during last December, and that data was clearly positive, and therefore this may have an impact on the US labor market data expected to be issued, and the following are the most important of these indicators:
The US Unemployment Claims Index: It showed significant negativity during last September, as the data issued by the US Labor Statistics Bureau over the past four weeks revealed that most US unemployment claims were stable below the level of 220,000 requests, which explains the decrease in relief requests during last November compared to October. The past, which may give a positive impression on the upcoming US labor market data.
At the same time, data from the US Bureau of Labor Census on US employment data showed positive employment data in the US private sector during the month of December, as the data showed that the jobs of the US economy in the non-agricultural sector increased by regarding 235 thousand jobs during that period, better than market expectations. By adding 152 thousand jobs. It is also higher than the previous reading, which recorded only regarding 182,000 jobs in November.
Third: Market expectations regarding the US labor market data:
Market expectations indicate that accelerating the pace of interest rate hikes may have a negative impact on the US labor market data. According to expectations, the US economy is likely to add only regarding 200,000 jobs. Expectations also indicate wage growth by 0.4% during the same period, in addition to the stability of unemployment at the level of 3.7% at the end of last December.
Fourth: Possible US labor market scenarios and their potential impact on the dollar:
The American dollar is clearly stable and settled at the highest level of approximately 105 points, benefiting from the issuance of some positive economic data and the results of the Federal Reserve meeting, which emphasized the need to address high inflation and continue to tighten monetary policy, and therefore the US dollar is waiting for the release of US labor market data to provide it with more support during the coming days.
The first scenario is that the US labor market data is positive and better than expected, as the economy adds many jobs, and unemployment decreases below the level of 3.7%. This positive scenario for the labor market data may raise the dollar index towards the level of 106 points, and it may move towards the level of 107 or 108. A point, because this scenario will give the US Federal Reserve more flexibility with regard to continuing to tighten monetary policy during the next bank meetings in 2023.
While the second scenario is represented in the negative data of the US labor market and that the economy adds jobs less than expected and that unemployment rises, and in this way, the dollar may decline below the level of 105 points once more and may fall towards the level of 103 points or less, because this scenario will make the Fed more careful We need to slow down the pace of interest rate hikes during the next February meeting, and perhaps keep rates unchanged, because the negativity of US labor market data will increase concerns regarding the negative repercussions of raising interest rates on the US economy, especially with the slowdown in inflation over the past few months.
