The US dollar (USD) is on a correctional slide from two-month highs as the US Nonfarm Payrolls meeting draws near. This decline is being prevented by rising speculation about the US Federal Reserve’s (Fed) rate hike pause in June and the parliamentary ratification of the US debt ceiling suspension. The May jobs report may provide a clue as to whether the US Federal Reserve will cease its cycle of tightening, causing more volatility in the financial economy.
Last month, Federal Reserve Chairperson Jerome Powell’s dovish comments temporarily halted the US dollar’s ascent. At the Thomas Laubach Research Conference’s “Perspectives on Monetary Policy” session, Powell stated that the current financial crisis, which resulted in tighter credit rules, has lessened the need to raise interest rates. “Our monetary policy rate may not require an increase as considerably as it would have otherwise,” he continued. Since then, the value of the US dollar has been rising as a result of multiple Fed policymakers’ hawkish rate projections, positive US economic statistics, and hope for a debt solution.
What will the upcoming Nonfarm Payrolls Report Contain?
The crucial USA monthly employment report information for May will be released on Friday. Compared to the aforementioned estimates of 253K jobs reported in April, markets anticipate that the US economy added 190K employments during the reported month. In May, the unemployment rate is predicted to be 3.5%, up from the 3.4% increase witnessed in April.
Apart from the main Nonfarm Payrolls print, the Average Hourly Earnings report is anticipated to draw attention since it may provide insight into the nation’s wage inflation, which might impact the Fed’s outlook for interest rates. The average hourly wage is forecast to increase in May at the same rate as in April, or 4.4% annually.
It’s also important to note that, according to figures released on Thursday by Automatic Data Processing (ADP), job openings in the private sector in the US increased by 278,000 in May. This reading came after the 291,000 gain noted in April and far outperformed the 170,000 market consensus. Additionally, the ISM’s Manufacturing PMI survey’s Employment Index increased from 50.2 to 51.4 in May, indicating a rise in employment in the manufacturing sector.
TD Securities analysts predict a small decrease in payroll growth in May: “US payrolls likely experienced a slight slowdown in May, continuing to grow at a robust rate of more than 200,000 for a second consecutive month. We also expect wage growth to increase by 0.3% m/m (4.4% y/y) and the unemployment rate to remain constant at its historical low of 3.4%.
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