German Data Disappoints | Investors Wary ahead of US NFP

Investors have decided that it is time to shave off some profit after record highs were recorded on the FTSE 100 index while the FTSE 250 wasn't too far off from its record high either. The german non-manufacturing order data shown another adverse reading and dropped to -2.5%. The weakness in the euro has failed to help this sector.

Failure to break the 20K mark for the Dow Jones index has also caused frustration among investors who are also loading their pockets by taking chips off the table.

This is especially important as we near an economic milestone that is the US NFP report. No one wants to trade big or leave a large portion of their hard money on the table ahead of the important economic release, which is due later in the afternoon.

After suffering its biggest one-day loss in nearly three days, the dollar index is recovering some of its lost ground ahead of the US NFP data. The data is also known as the mother of all economic numbers, and investors always pay very close attention to this number as this provides a bounty of information regarding the health of the economy.

The tone set by the US ADP employment report, which was released yesterday, has confirmed that the job market or growth in that area was weak because the drop in payroll was much larger than expected. This number often provides a lot of clues about the US NFP data.

Furthermore, traders are not feeling too optimistic about the today's US NFP data due to the weakness in the ISM non-manufacturing report which also confirmed weakness in the market. The employment component of this report has shown a steep drop which is a sign that things are about to get ugly.
All of these factors have produced a nasty cocktail which has made investors increasingly apprehensive, and if today's number confirms that the market is weak, then we could easily see investors booking more profit from the dollar trade.

The number will be released later today and the one element of that report which you will want to focus on is the wage growth. The forecast is for 0.3% growth although we have seen a drop of 0.1% during the past month. This puts the current forecast in a gray area. The increase in the participation rate could also have an adverse impact on the unemployment rate.

The question which matters the most for traders is if today's number has the ability to deter the Fed from changing their path for the interest rate hike. I If the number falls off the cliff, it could force their hand, but they are not going to pay too much attention before there is a clear trend. This trend can only be mapped out after seeing a number of adverse economic reports.
Frankly, we are not there yet because if you focus on the broader picture, there are other reports which do paint a more optimistic picture. These reports include consumer confidence, the Michigan Sentiment Index and the employment component of ISM manufacturing which all predict that there could be a surprise in today's number.

Therefore, the only element over the next few months which matters the most for the Fed when it comes to increasing or lowering the interest rate is the ability of Donald Trump to deliver on what he has promised.

Meanwhile, the yellow metal is by large, the most favourable commodity among traders today. Weakness in the dollar helped the gold price but investors have been quick to book profits. The metal is trading in negative territory today but the move is not that significant and volume is low.

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