USD is Deeply Influenced by Employment Data

USD performed well in the early year, the situation mainly caused by the new style of Bidens administration that came with beneficial factors. However, the currency became weak again in the second quarter, testifying that this good performance was a flash in the pan, which was ascribed to the retracement of the U.S. bond interests, devastating unemployment, and desperate retail data. Speaking of DXY, almost all ramp-ups in the first quarter has evaporated. Therefore, will the USD market embrace a final rally or suffer a plummet？ It is the following factors that should be noticed.

To begin with, the rise or fall seen by USD is closely related to the U.S. bond interests so the direction in which they might move should be identified preferentially. Under the domestic climate of the accelerating inflation and economic recovery, the U.S. stock market is superior to that of the U.S. bond interests. The latter is believed to have the possibility of rebounding, which is extremely conducive to USD.

In addition, an increasingly severe plummet has rammed into USD recently, the main reason for which refers to the unsatisfactory economic data seen by some regions in the U.S., especially that relating to employment and retail sales. As such, the Employment Situation Summary scheduled for next Friday is key to the trend of the USD market. Being anticipated by Reuters, the unemployment rate in May will be 5.9%, coupled with the unemployed population totaling 621,000. Both figures are expected to be far better than their previous counterparts respectively. If the data can really turn the tables, it is believed that USD will embrace an opportunity to enjoy a retaliatory rally. On the contrary, the currency will be enveloped by adversity, provided the worsening data.

At the same time, scheduled to be released tonight, the Consumer Price Index, also known as Core CPI, of April is predicted to be worse. In this case, an idea may occur to the Federal Reverse (Fed) that the interest-rate hikes should be brought forward to support USD. However, it will be hard for the Fed to carry out this increase in advance if the inflation rises and the economy worsens. Hence, the currency cannot be strong again without the continuous positive growth of the economic data.

Whats more, the Board of Governors of the Fed noted that delisting in advance would not be placed on the agenda under the context of economic recovery and higher inflation, which was indicative of suppressing USD to some extent. Whereas Clarida, Vice Chairman of the Fed, has implied that delisting may be discussed in the upcoming meetings, which is determined by the economic data. Although the Board emphasized the impossibility of delisting when the American economy was thriving, Clarida has shown his intention of putting this on the agenda this time, thereby making the Fed less insistent on the objection to delisting and weakening the growth of USD than it used to be, which is based on the improvement of data in the future.

In conclusion, the Employment Situation Summary next Friday is of the most importance. The population of people who claim the dole has been continuously reduced and Reuters has been optimistic about the future recently. Therefore, I believe that the employment data will be recovered, featuring the decrease of the unemployment rate and the increase of the non-agricultural population. However, we can still wait and see, prudently making decisions on market entry tactics based on data.