If market expectations are met for Friday's Non-Farm Payrolls figure to come in at around 200,000 new jobs created then there is unlikely to be much movement in USD exchange rates or any change in the U.S. Federal Reserve's monetary policy.
In effect it could be quite a dull event. Other than the usual momentary spike in volatility on the numbers release, a jobs figure close to 200,000 for April will probably do little to alter perceptions or the direction of the U.S. Dollar Index (NYBOT:DXM14). Also, the US Federal Reserve is likely to carry on reducing its bond purchase programme by $10 billion a month.
Therefore movement in the USD, in the short term at least, is likely to be driven by events elsewhere. On EUR/USD the focus is very much on the European Central Bank as it frets over potential deflation and the strength of the single currency. As seen recently the GBP/USD cross is very sensitive to the growth prospects of the UK economy.
EUR/USD poised for NFP
But then again...it might not be so dull
If there is any surprise on NFP it is likely to be on the upside in line with the general recovery in jobs numbers since they hit a low point in December. Also, the effect of the winter weather has passed and this may have seen some delayed economic activity take place on top of the general recovery in growth.
Another encouraging factor is that there is evidence of credit growth in U.S. economy suggesting that companies and consumers are spending more. At the high end of forecasts puts NFP at 250,000. A figure in that range or larger will certainly trigger the forex markets to bring forward expectations of an interest rate hike once the Fed's tapering is over. That would be supportive for the USD.
However, the usual caveat is that NFP is generally a difficult number to predict and for whatever reason it could still surprise on the downside even though the evidence suggests otherwise and markets are generally poised for a stronger number.