Another 180K expansion in U.S. Non-Farm Payrolls (NFP) may trigger a near-term decline in EUR/USD as the ongoing improvement in the labor market encourages the Federal Open Market Committee (FOMC) to raise the benchmark interest rate sooner rather than later.

What’s Expected:

Why Is This Event Important:

The FOMC appears to be on course to further normalize monetary policy in 2017 as the U.S. economy approaches ‘full-employment,’ and it seem as though the central bank will start to unwind its balance sheet later this year as officials discuss ‘potential benefits and costs of approaches that would either phase out or cease all at once reinvestments of principal from these securities.’ However, Chair Janet Yellen and Co. may attempt to buy more time as the pickup in headline inflation is largely driven by higher energy prices, and Fed officials may continue to forecast a terminal fed funds rate close to 3.00% as ‘market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.’

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

ADP Employment Change (MAR)

185K

263K

New Home Sales (MoM) (FEB)

1.8%

6.1%

Housing Starts (MoM) (FEB)

1.4%

3.0%

The pickup in building activity accompanied by the ongoing expansion in the housing market may generate a better-than-expected NFP report, and a marked improvement in labor market dynamics may spark a bullish reaction in the greenback as it boosts interest-rate expectations.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

ISM Non-Manufacturing (MAR)

57.0

55.2

Advance Retail Sales (MoM) (FEB)

0.1%

0.1%

NFIB Small Business Optimism (FEB)

105.6

105.3