Image source: Aleksandar Mijatovic © 123RF.com
The Non-Farm Payrolls, which is released on the first Friday of the new month as per usual, is expected to demonstrate whether the American labour market has been able to sustain its solid performance in November as well.
The US unemployment rate increased to 3.6 per cent in October from its previous level of 3.5 per cent, which was recorded in September.
US Unemployment Rate. Image source: TradingEconomics.com
Despite this minor deterioration, however, the labour market continues to be performing exceptionally well, and it is currently close to full employment.
The consensus forecasts for this Friday’s report project the American economy to have added 189 000 new jobs in November from last month’s 128 000. Regardless, the overall unemployment rate is expected to remain unchanged at 3.6 per cent.
Positive revisions from October and September’s performances could also indicate possible increases in the labour force.
Despite its importance as an economic indicator, the NFP has also been widely politicised over the past few months.
President Trump has used the indicator on multiple occasions to claim responsibility for the robust performance of the labour market, as part of his political bid to gain additional support from voters.
Thus, the NFP is likely to become even more closely scrutinised by politicians and economic analysts ahead of next year’s presidential elections in the US.
Additionally, much closer attention to the performance of the labour market is also likely to prompt heightened volatility in the financial markets.
As a result, the US dollar could be expected to become even more responsive to observed changes in employment over the next several quarters.
The biggest mover in the forex market this week could be expected to be the USDCAD pair given the busy schedule of economic events that are taking place in the two countries.
The Bank of Canada is deliberating on its monetary policy on Wednesday and on Friday Statistics Canada is scheduled to release its jobs report, which will coincide with the release of the NFP.
Consequently, the underlying volatility of the USDCAD is likely to reach a peak then.
The currency pair is currently continuing to consolidate in a narrow channel, which was indicated in our market update review from the 29.11.19.
At the present rate, the market momentum is especially subdued, as indicated by the convergence of the MACD indicator close to the 0.0000 level.
After the volatility starts to pick up into the middle of the week, the price is likely to breakout above the boundaries of the range and form a new price swing in either direction.
USDCAD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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