Today's main event for the currency markets will be the publication of US employment data. It is worth noting that ADP figures come out on Wednesdays at the beginning of each month, followed by official figures from the US Department of Labor.
According to the ADP forecast, the US economy received 613,000 new jobs in the Nonfarm sector in August against 330,000 in July. This is quite a significant amount, and if the figures really do not disappoint and are at the level of expectations or even higher – this will be a strong signal for investors indicating the resumption of a normal situation in the labor market, which will ultimately affect the growth of the national economy in the near future.
How will the markets react to good news?
We believe that strong data will support the demand for shares of companies in the world and primarily in America because the recovery of the labor market will also lead to an increase in business and production activity, which will primarily stimulate the demand for shares of growth companies.
As for the currency market, one should expect a local rise in the dollar rate amid possibly strong data. This is the traditional market reaction. However, this strengthening (if there will be) will be limited only, since the growing optimism about the US economy will lead to an increase in demand for risky assets, and in turn, this will hit the US dollar. But even in this case, one should not expect it to fall sharply, since the course towards a decrease in dollar liquidity in the US financial system, as announced on Friday by J. Powell, will gradually increase the deficit of this currency. In general, we believe that if its weakening takes place, then it will not be critical.
In the commodities market, good news from ADP will lead to increased demand, and the likely weakening of the US dollar will support price growth.
What should be expected in the markets if the data is significantly weaker than forecast?
It will be possible to observe the opposite picture in the stock and commodity asset markets. The dollar exchange rate will also not undergo any noticeable changes in this case. Volatility will increase in the market, and so, shares of value companies will be high again.
But again, it should be understood that the figures from ADP are not the main ones. Investors will focus on Friday's employment data, which can become a driver for local growth or fall in the markets.
Forecast of the day:
Spot gold is trading below 1817.45 levels. Positive data as a whole should support the price, which after breaking this mark will rush to 1830.00.
The USDCAD pair is above the 1.2580 level. The resumption of the rise in crude oil prices and strong data from the US statistics will lead to a decline in the pair to 1.2490.
