Today’s trading is just about the non-farm payrolls data. Consensus expectations are for 180,000 new jobs and an unemployment rate of 7.4 percent. The jobs number is probably the single biggest influence on the dollar but in recent months it has taken on an even bigger role as the Fed has made jobs growth key to slowing down its stimulus.
Leading into today's number, the ADP national payrolls processor report showed on Thursday that U.S. private employers added 176,000 jobs in August, just short of expectations. “The ADP correlation to payrolls is moderate at best, but the psychological attachment is strong," said Joseph Trevisani, chief market strategist at WorldWideMarkets after the report. "The market is already expecting the quantitative easing train to slow in two weeks, today's ADP result offers modest reinforcement to that view.” A separate ISM services index report on Thursday showed the employment component of that index jumped to a six month high. Both bode well for today's number but expect volatility.
The Fed next meets Sept 17 and 18 and if this is a good number it will raise anticipation that the Fed will cut stimulus from the current $85 billion in asset purchases every month by $15 to $20 billion. That will send the dollar higher. A bad number and investors will punish the dollar. But those are the knee jerk trading reactions on day. The Fed is still going to cut stimulus and investors will just start looking at the next meeting October 29 to 30 even if they are disappointed this month. Longer term, the dollar’s strengthening uptrend will continue.