US Nonfarm Payroll Report Dominates Currency Trading
Official US jobs data known as the Nonfarm Payroll report on Friday will be the biggest driver of the US dollar cross in the coming few days, with a strong number making a September rate hike a strong possibility despite the IMF’s protestations. Thursday’s IMF report is another worrisome sign that the U.S. economy is stalling. Although the IMF still expects America’s economy to grow this year at a rate of 2.5% that is almost in line with last year’s growth.
The hope was that America would have a break out year in 2015. As recently as April, the IMF projected 3.1% growth for the U.S. Now the IMF sees too many factors holding the economy back. The US dollar gained 19 points to trade at 95.69 regaining some momentum after a better than expected weekly unemployment report on Thursday. The focus will be on the monthly US non-farm payrolls report, which is closely watched by the Federal Reserve as it weighs the likely timing of interest rate hikes this year. Data released yesterday showed US initial jobless claims fell by 8,000 to 276,000 in the final week of May, boosting optimism about the upcoming payrolls report for May. While the consensus picks a 225,000 gain, analysts suspect the market is readying itself for a better result than that. Much scrutiny will also fall on the wage growth numbers, which remain relatively subdued.
In the Asian session the dollar moved narrowly around ¥124.30 as investors found it difficult to trade aggressively after U.S. economic data released overnight came out mixed. While Automatic Data Processing Inc.’s private-sector employment report for May beat market forecasts, the U.S. Institute for Supply Management’s nonmanufacturing business index for May was weaker than expected. The dollar rose above ¥124.50 after the greenback gained ground against the Australian dollar, which was dampened by weak Australian economic data releases, including trade statistics for April, market sources said. The Aussie added 13 points to trade at 0.7697 after a slight correction after yesterday’s decline. The Australian dollar fell yesterday after retail sales and trade data missed expectations. The kiwi dipped this morning as traders wait for the US nonfarm payroll numbers. The kiwi is trading at 0.7135 up by 5 points.
The euro declined 26 points to trade at 1.1230 as the dollar recovered a bit, but it was Greek headlines that send the euro on a see saw. The euro traded above 1.13 as the Greeks indicated that they would make the June 5th payment only to reverse their announcement and rejected the offers from the EU and notified that IMF that they would be making one combined payment at the end of the month. The IMF granted his request to bundle together four payments due this month, which means the 1.5 billion euros that Greece owes to the institution will now come due on June 30.
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