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Market Drivers August 4, 2017
Australian Retail Sales beat
Waiting for NFPs
Nikkei -0.38% Dax 0.08%
Oil $48/bbl
Gold $1269/oz.

Europe and Asia:
AUD Retail Sales 0.3% vs. 0.2%

North America:
USD NFPs 8:30
USD Trade Balance 8:30
CAD Labor Data 8:30

It’s been a typically quiet pre-NFP night for FX as traders gear up for the marquee event of the week due at 12:30 GMT.

The consensus calls for NFPs is around 180K. A figure anywhere within that range should have minimal impact on trade whereas a print of 200K would be viewed as positive and anything below 150K could drive the buck even lower.

Pre-NFP data is mixed with ADP showing better than expected results, but the employment component of the ISM services pointing to a possible miss as that reading slipped more than 3 points since the month prior.

Aside from the pure labor data, the focus as always will be on wage growth with market anticipating average hourly earnings to rise by 0.3%. This, in many ways, will be a key metric to focus on. The bulls whole argument rests on the idea that with labor slack essentially gone, wages would have to rise which in turn would lift incomes and contribute to better growth in H2 of this year. So far that scenario has not panned out as wage growth has been far more muted than expected. It today’s data shows average hourly earnings rising at 0.1% rate or less, the dollar is sure to take a hit as the market will once push the Fed funds expectations lower.

A lower print is likely to break the 110.00 support for USDJPY for good and could take pair towards 110.00-108.00 corridor as the pair makes 4-month lows. A better than expected reading, however, could unleash a monster short covering rally that could take the pair beyond 111.00 before trading ends for the week.

Boris Schlossberg
Managing Director

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