AUD/USD: Projected Strong NFP Figure Seen to Revive Fed Pullback Talks

The US dollar is foreseen to gain opposite the Australian dollar today on views that an expected buoyant Non-Farm Payrolls report could spur the Federal Reserve to start considering a rollback of its easy monetary policy. Likewise, other economic reports due today are also expected to provide a rosier picture of the world’s largest economy.

The US labor market likely began the new year on solid footing, but January’s jobs growth is not expected to put much of a dent in the unemployment rate. The Labor Department is projected to report that Non-Farm Payrolls gained 161,000 last month after recording a 155,000 count in December. Nonetheless, economists are expecting a higher number as reports released this week suggested improvements in hiring patterns. Wednesday’s ADP report estimated that 192,000 private sector jobs were added, higher than the 164,000 reading in December. Likewise, the employment sub-index of the Chicago PMI surged from contraction in December to a robust expansion in January. Although the jobless claims figure came in above expectations, the four-week moving average barely moved.

Analysts say that the labor market continues to be the bellwether indicator for Federal Reserve Policy. The Fed has stated that it will not consider raising benchmark interest rates until the Unemployment Rate drops to 6.5 percent. However, the Fed could end its quantitative program much sooner as FOMC members have said an unemployment rate around 7 percent by the end of 2013 could be sufficient to halt bond purchases. Hence, a stronger than expected print in the NFP report today could intensify such speculations, giving the Greenback a relief in turn.

Meanwhile, other reports on deck today are likewise believed to underpin the strengthening recovery of the US economy. The Institute for Supply Management is awaited to report that its Manufacturing PMI climbed marginally from 50.7 points to 50.8 points in January to indicate a second consecutive expansion. After falling by 0.3 percent in November, construction spending is deemed to have rebounded with a 0.6 percent jump in December, further boosting prospects for the housing market. Likewise, the University of Michigan Consumer Sentiment report is estimated to be revised higher from 71.3 points to 71.4 points in January. Considering these, a short position is recommended for the AUD/USD trades today.

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