The Week Ahead: New Year, New US Jobs Numbers

 

  • US NFP data on Friday will be the key event for the trading week once markets re-open from the New Year holiday.
  • Chinese Manufacturing PMI data on Monday will be closely watched, with a weak result likely to hurt risk-sensitive assets like the AUD.
  • Lower liquidity over the New Year period could exacerbate some price movements due to the thinner trading conditions.

The week ahead in financial markets may be a holiday-shortened one, but it contains some key releases which could influence which way risk-assets head to start the new year.

Monday will see the release of Chinese Manufacturing PMI data, and if we happened to see a soft print below the 50 level (which would indicate it is contraction) this could dent investor confidence to start the week. With much focus on the US-China trade negotiations, and further signs of a Chinese economic slowdown would likely hurt risk-sensitive assets such as the Australian Dollar.

The Aussie Dollar has been languishing amid the market turbulence, while currencies such as the Yen and Swiss Franc have been finding buyers as part of a move toward defensive currencies.

Tuesday will see the major markets closed for the New Year holiday. But once markets re-open and normal service resumes, attention will again be on the latest US economic indicators. ADP private employment data is due for release on Thursday (US time), as are the ISM Manufacturing PMI numbers. But then on Friday, the big one drops with the Non-Farm Payrolls (NFP) numbers due for release.

The market is expecting the US economy to have created around 180k jobs for the month of December (according to consensus estimates). With much speculation surrounding both US economic growth in 2019 as well as the projected level of interest rates, any significant deviation from the expected jobs number (be it higher or lower) could see a further dose of volatility added to an already highly anxious trading environment.

The major US indices have been up and down like a yo-yo of late. Last week, they were mainly up, but overall for the month they have been sharply lower. Why? Because of uncertainty about the US Government shutdown, uncertainty over US-China trade talks, uncertainty over whether the US economy is headed towards Recession and uncertainty over how the FOMC will manage interest rates.

The bottom line – markets don’t enjoy uncertainty. And until such time as more clarity arises over these key concerns, more volatility looks likely. Also, the shortened trading week and the holiday period usually means there is less liquidity in the market, which can serve to exacerbate some of the price moves.

So while we do have a slightly interrupted trading week owing to the New Year holiday, there are some big events waiting in the latter part of the week in the form of US jobs numbers which could shape the direction of both the US Dollar and market sentiment in the early days of 2019.

For a full list of this week’s economic data releases, please visit AxiTrader here.

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US Non-Farm Payrolls