US Dollar Outlook: Important Economic Data Can Be Overshadowed by Politics

This week should be fairly important for the US dollar. Several major economic reports will come out during the week, including nonfarm payrolls. But there is a high probability that politics will overshadow macroeconomic data.

As usual, nonfarm payrolls will come out on Friday. The report for October showed a huge increase by 261,000. But that was actually a compensation for the previous month’s reading of 18,000, which was skewed by hurricanes. Analysts expect that the data for November will show a more modest but still impressive figure of 200,000. Economists hope that monthly wage inflation will be at 0.3% after the disappointment lack of growth in October. The unemployment rate is expected to stay at the very low 4.1% level.

Automatic Data Processing will release its private report ahead of the official data, on Wednesday. Analysts expect that the data will also show a substantial growth, in a neighborhood of 191,000.

Outside of the jobs data, there will be plenty of other economic reports. Among them, perhaps the most important will be the non-manufacturing Purchasing Mangers’ Index from the Institute for Supply Management and the trade balance. The ISM services PMI is expected to show a drop from 60.1% to 59.2% in November. As for the trade balance, experts estimated ahead of the official data that the deficit widened from $43.5 billion to $46.2 billion in October.

But whatever impact the reports may have, it can be overshadowed by US politics. On a positive side, Senate Republicans managed to pass the bill for the long-awaited tax reform, and that news caused the dollar to open sharply higher. But there is still a long way between passing the bill and implementing an actual legislation that should create a fiscal boost. Turning to the negative side, there was news that former US security adviser Michael Flynn is ready to testify against President Donald Trump about his contacts with Russians during the presidential election campaign in 2016. So far, markets have not shown an interest in the news, but that can change in case of significant developments in the case.

With such unpredictable and messy thing as politics mudding the waters, it is unsurprising that market analysts were not ready to predict a certain direction for the US dollar. The same as for the previous week, DailyFX issued a neutral forecast for this week, while Forex Crunch had mixed predictions for the greenback versus different currencies.

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