US futures and European markets are trading higher but with caution. This is mainly due to two main reasons: firstly, we had feeble economic numbers out of Germany- the German industrial production number fell to -0.6%, well below the forecast of -0.4%. The weakness in the German economic number had little to no impact on Euro apart from the fact that speculators do strongly believe that German Bundesbank is going to face pressure to do something on the fiscal front in order to ignite growth. So far, the bank has been hesitant to bring fiscal spending on the table.
Secondly, we have two important economic events taking place later today. Both of them have huge potential to move the markets in either direction. Investors certainly do not want to be caught on the wrong side, hence a large number of them are sitting on the side, and the ones who are participating, they have adopted a cautious approach.
So, what are those two important events?
Well, one of these is very well known- it is the release of the US NFP data. It usually shapes the trend for the rest of the month for the equity markets and for the forex as well.
Hours later, we have the Fed chairman, Jerome Powell speaking, and his comments are going to be shaped by the US NFP data.
Let’s begin with the US NFP data first.
The Forecast
The mother of all economic data, the U.S. non-farm payroll will be released later today. The forecast is for a solid number, it is expected that the unemployment rate will stay at 3.7% while the US NFP is expected to hit 160K. The weakness or strength in the US NFP number matters the most in terms of the Fed’s monetary policy decision.
Can The Data Push The Fed To Cut Interest Rate Again
Remember till this day, employment data is still the most important gauge to measure the economic health of the country. So, beating the headline number of 160K may have some impact on the possibility of cutting the interest rate further in their next monetary policy meeting. Market participants are widely expecting that the Fed will cut the interest rate because the economic numbers aren’t that strong.
Jerome Powell’s About Trump & US NFP Data
Moving onto Jerome Powell’s speech, investors would like to know how much attention the Fed is paying to the economic data and the US President, Donald Trump. The president has widely criticized the Fed for not doing much and he has been persistent with his idea that the Fed should cut the interest rates more aggressively like other central banks. Moreover, there is also the issue of division of opinions among the Fed members. Hence, traders are going to watch his speech clearly and see if they can spot the next move by the chariman.
The Impact On Gold Price
The impact of the US NFP on the gold price is often substantial because it moves the dollar. The precious metal is on track for its second down day, yesterday’s sell-off was intensive as investors shaved off their gains ahead of important economic reading. The volatility in the gold price is likely to pick up momentum again on the release of this number and if the number is really strong, meaning above 200K, it may push the gold price below 1,500.
