Greg Gibbs, Analyst at Amplifying Global FX Capital Pty Ltd, suggests that the US payrolls report is due on Friday and may determine the tone of the FX markets.
Key Quotes
“The market is looking for strong activity outcomes which may help underpin an already strong USD. But the crux may be wages.”
“The market has become numb to inflation risks from a tightening labor market, witnessing only a very slow grind in wages growth. But the US average hourly earnings data do occasionally move significantly more than forecasts, and we have to remain watchful for a pop in wages considering the tightness of the US labor market.”
“We agree with RBA Governor Lowe that one of the major risks to the global economy, one that does not get mentioned very often, is that US inflation rises more than expected.”
“RBA Lowe said on Wednesday that, “The United States is experiencing a large fiscal stimulus at a time when the economy is at full employment and is growing quickly. This is an unusual combination to say the very least. Past experience suggests that it could lead to inflation increasing significantly. Financial markets are, however, heavily discounting this possibility, which means that if it did take place it would come as quite a surprise, with repercussions for markets and the real economy.”
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