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Forex Market Analysis

May 07, 2021 | Currency Market Analysis

Global Themes

Non-farm payrolls in focus as UK election results roll in

• Choppy days ahead with UK elections being announced
• Dollar weaker ahead of NFP

UK

Choppy days ahead with UK elections being announced

Yesterday the Bank of England (BoE) predicted a sharper rebound in the British economy thanks to easing COVID-19 restrictions, but once again re-iterated it needed clear evidence of recovery before tightening policy as the BoE announced a modest slowdown in its bond-buying stimulus. Sterling displayed a fairly messy knee-jerk reaction in the immediate aftermath of the BoE's policy decision.

Also challenging the GBP/USD traders are elections in England, Wales and Scotland. At the end of the day in Scotland, polls suggested Nicola Sturgeon will keep hold of the reins in Scotland and may gain the planned majority, which in turn could recall voting on the Scottish Referendum and put the pound under further pressure. Elsewhere in the UK, votes were being cast for local councils. In Hartlepool, the Conservative Party won the by-election for a new member of parliament tightening the prime minister's grip on traditional opposition-supporting areas causing GBP/USD to pivot at around $1.3900 after the announcement.

  • Moving on, sterling traders should keep their eyes on the Brexit and coronavirus updates ahead of the US employment figures.

USD

Dollar weaker ahead of NFP

The US Dollar remains under mild pressure this morning ahead of the monthly jobs data released this afternoon. Today's release could be key in determining the outlook for the US economic recovery and a strong figure could increase investors appetite for stocks and riskier assets.

The US payroll data set to be announced at 1:30pm this afternoon is expected to show another bumper number of 978k new jobs added in April after 916k jobs were added in March. The unemployment figure is also expected to fall to 5.8% from 6% for the month of March. However, for the US, a strong jobs recovery can sometimes be a double-edged sword. It could boost appetite for riskier asset, which is negative for the dollar, but it could also spark confidence in the Federal Reserve (Fed) adjusting policy, which would boost US bond yields and in turn the dollar.

  • EUR/USD found support at the $1.20 handle and this morning seems to be making a run back towards the $1.21 mark. However, the jobs print this afternoon could trigger heightened volatility around 1:30pm.


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