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May 31, 2021

The Week Ahead: NFP, RBA, GDP & Employment

Bart Kurek

Let's look at the news event's we've got lining up this week...

(AUD) RBA Rate Statement

The Reserve Bank of Australia (RBA) is the central bank of Australia which is responsible for the stability of the Australian Dollar currency, full employment, and economic prosperity and welfare of the Australian people.

In this rate statement, the RBA is expected to keep rates on hold at 0.10%. Aussie traders are keen to find out if policymakers are considering tapering soon. RBA officials are likely to hold preliminary discussions on whether or not to extend the three-year yield target and taper purchases under its longer-term asset purchase program.

(AUD) GDP q/q

A Gross Domestic Product (GDP) report is a measure of the size and health of a country's economy over a period of time. The figure sums up the country's performance in terms of trade, consumer activity, government spending and investment during a particular period.

For the first quarter of 2021, the Australian economy is expected to have grown by 1.1%, slower compared to the earlier 3.1% expansion. Stronger than expected results could be a big boost for the AUD, as it could assure traders that the Australian economy is resilient enough to withstand further headwinds.

(CAD) Employment Data

The Employment Change report is a measure of the change in the number of employed people in Canada. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity. The number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour-market conditions.

This month we see yet again more job losses in Canada. Although the expected reduction of 20.3k would be significantly lower than last month's 207.1k drop, this is still bad for the CAD. This might still bring the unemployment rate up from 8.1% to 8.2%. Underlying components such as full-time hiring and the labour force participation rate would likely impact the CAD's reaction.

(USD) Non-Farm Employment Change

The Non-Farm Payroll (NFP) or also known as Non-Farm Employment Change data, released by the Bureau of Labor Statistics, is a key economic indicator for the US economy which represents the number of jobs added to US citizens, excluding farm, government, private household and non-profit organisation employees.

NFP data always causes a commotion in FX as it is an important indicator for the Federal Reserve Bank. When unemployment is high, policymakers tend to have an expansionary (stimulatory, with low-interest rates) monetary policy with the goal to increase economic output and increase employment.

This month analysts are expecting a massive comeback from the devastating results last month. We expect hiring to print at 670k versus the earlier 266k gain, which will likely bring the unemployment rate down from 6.1% to 5.9%. Average hourly earnings could slow from 0.7% to 0.2% to reflect weaker wage growth. Massive strength in the USD is expected on Friday if we do see these figures come out as expected or better than expected.

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