FX.co ★ Strong NFP data will support demand for risky assets

Today, investors' attention is focused on the publication of US employment data. This is really very important since it will not only affect the views of American investors about the Fed's behavior in the issue of the monetary exchange rate, but also on foreign ones, as the influence of the US economy and its state on the world is still significant.

Based on the presented forecast, the US economy should have received 750,000 new jobs in August against the growth of 943,000 in July. Despite the fact that these figures are noticeably lower than those presented a month earlier, they are still significant. So, if the number of new jobs is in line with expectations or slightly higher, this will be perceived by the markets as a strong signal of the recovery of the national economy, despite the raging COVID-19 pandemic.

How will the markets react to the positive news on America's unemployment?

We believe that the figures released in line with expectations or slightly higher will be perceived by investors as positive, which will lead to a continuation of the rally in the stock markets, starting primarily in the United States. Commodity assets will also receive support on this wave of optimism. In the currency market, the US dollar will traditionally receive local support on strong data, but then, it will most likely be under pressure due to the growing demand for risky assets, which recently leads to a decline in the exchange rate of the US currency in several cases.

What happens if the data is significantly worse than the forecast?

In this case, the markets will be disappointed. The demand for stocks will fall, but this phenomenon will most likely be temporary since the ultra-soft course of the Fed's monetary policy will remain stimulating and will not allow stock indices to fail much, although this news may cause a short-term correction. The US dollar will decline in the short term, but it will also be held at approximately current levels because its exchange rate is generally supported by the demand factor for it in negative situations as a safe haven currency. As for the commodity market, it will also be possible to expect a decline in quotes.

During the start of the European trading session, the dynamics of indices and assets indicates that investors are expecting positive news on US employment. We are also in line with this market mood.

Forecast of the day:

The EUR/USD pair is trading below the level of 1.1885. Its breakdown amid news from the US will allow the pair to further rise to the level of 1.1965.

The AUD/USD pair reached a strong resistance level, which it can break through and rise to the level of 0.7500 if the markets rise in view of positive mood after the publication of US employment data.