The US economy is set to release the March non-farm payrolls figure on Friday and analysts are counting on a strong figure to follow the gains posted in February. Recall that the US job market underwent a slowdown in December 2013 and January this year due to the extreme weather conditions that dampened overall economic activity in several states.
If the latest ISM manufacturing PMI is any indication, markets seem to be bracing for a decent improvement in the labor sector. The PMI climbed from 53.2 to 53.7, short of the consensus at 54.2, but the labor component showed a healthy improvement so it might lead to gains for the private sector overall.
Non-Farm Payrolls Forecasts
The March non-farm payrolls figure might show a 200K increase in hiring, stronger than the previous month’s 175K and enough to show that the labor market did recover from the slump. This could reinforce traders’ views that the Fed will stay on track with its taper plan and will consider hiking interest rates once the economy has shown enough signs of a recovery.
Recall that Fed Chairperson Yellen previously mentioned that the Fed might look into hiking interest rates around six months after the asset purchases end. However, she took a less hawkish stance this week when she pointed out that hiring is still weak and that the labor sector could rely on continued policy support.
The upcoming non-farm payrolls release should give more direction for the US dollar as it would set a clearer bias for Fed monetary policy. A stronger than expected reading might spark huge gains for the dollar, particularly against the weaker currencies such as the euro and Japanese yen. On the other hand, a weaker than expected result could show market watchers that the economy is still feeble and trigger a selloff for the dollar against the stronger currencies like the pound and Kiwi.
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