Investors have completely turned their attention to the outgoing data on the US economy, which in its dynamic fully exerts its influence not only on the currency market, but also on the world markets in general.
This attention is due to the fact that the American financial market, despite all the problems in the country's politics, as well as the worst situation among economically developed countries with the situation with coronavirus infection, remains the most influential, which means that any more or less important events taking place there have and will have a significant impact on the global market.
Thus, the data on the number of applications for unemployment benefits, published on Thursday, managed, if not to reverse the mood in the markets, then somewhat reassure investors. The presented data on the number of applications for unemployment benefits showed a strong decline. Their number declined to 1.186 million from 1.435 million a week earlier and the consensus forecast of 1.415 million applications. The average number of applications for benefits also naturally declined from 1.36875 million to 1.337 million.
On this wave, the US stock market began to pull back up, but the statistics could not greatly change the picture on the currency market, where there was multi-directional movement of currency pairs during the day, where the US dollar was present. This behavior can be explained by justified doubts that the worst in the American labor market is over. Tensed markets awaited the publication of official figures on the number of new jobs and the unemployment rate for July, which, in our opinion, could significantly affect the dynamics of the dollar and the global markets in general. By the way, it was the behavior of the US government Treasury bond market that indicated these doubts. The benchmark yield of 10-year Treasuries fell more than 6% on Thursday, approaching the 0.51% mark.
So, how will the markets likely respond to employment values? According to the consensus forecast, the US economy should receive 1.6 million new jobs in July. The unemployment rate is expected to drop to 10.5% from 11.1%.
We believe that if the number of new jobs turns out to be significantly worse than the forecast, then this may become the basis for a deterioration in market sentiment and an increase in demand for defensive assets, including the dollar. This likely behavior can be explained by the growing fears that the growth in economic indicators, which was noted in the last month and did not reflect the actual reality. In this case, not only the dollar will receive support, but also the yen and the Swiss franc, and gold may correct downward on the wave of demand for the dollar.
At the same time, if the data on the number of new jobs are even slightly higher than expected, this will be a signal for a resumption of the rally in the stock markets, an increase in government bond yields and, of course, for a decline in the dollar.
We will already know what values will be at 12.30 Universal time.
Forecast of the day:
The EUR/USD pair remains in the range of 1.1700-1.1900 awaiting the release of US employment data. We believe that if the upper border of the range is broken today amid positive values, then the pair will rush to the level of 1.1970.
The AUD/USD pair, like EUR/USD, is consolidating in anticipation of the release of data on unemployment in the United States, which, if not pumped up, will push it back to growth. On the positive not, it will rush to the level of 0.7260 and then to 0.7300.