Weekly currency news: US jobs data curbs dollar rally
The dollar lost ground on Friday and pulled back from seven-week highs after a weaker than expected US non-farm payrolls report, which showed a slowdown on wage increases that might collide with the Fed’s plans to maintain their gradual pace of monetary tightening.
Non-farm employment increased by 134,000 in September, according to the US Department of Labor, a reading significantly shorter than the market’s consensus of 185,000, while weekly wages showed a yearly increment of 2.8%, down from 2.9% in August, which has dampened the market expectations created by the hawkish message given by of Fed Chairman Jerome Powell last week.
The economic calendar this week will be quite light, with the US Gross Domestic Product, the minutes of the last ECB’s monetary policy meeting, and some speeches from Fed members as the most relevant events.
Currencies last week
- EUR/USD: dives to six-week lows sub 1.1500
- GBP/USD: bounces up from 1.2925
- EUR/GBP plunges below 0.8800 Brexit deal hopes brighten
- USD/JPY rally extends to 2018 highs above 114.00
Main events this week:
In the US calendar, on Wednesday, the conferences of Fed members Williams and Bostic will be observed with interest to see whether the downbeat US report has dented the Fed’s theory that US economy is still far from the neutral interest rate. The dollar lost steam on Friday after a steady rally over the last two weeks and, in that context, a dovish reaction by the Fed might help to extend the correction.
On Thursday the focus will be on the release of the US Consumer Prices Index. US inflation is expected to have accelerated in August way past the Fed’s 2% target of price stability, which might restore the confidence on the Fed’s monetary normalization plan and could strengthen the dollar.
On Friday Fed member Bostic’s speech will be observed again. His comments about the US economic outlook and on the bank’s monetary policy plans might have some moderate impact on the dollar.
In the Eurozone, the release of the minutes of the ECB’s monetary policy meeting will be observed with interest after the upbeat outlook on the economy recently given by President Mario Draghi. The market is eager to know whether the bank could start to hike interest rates ahead of schedule, and any hints in that direction would be positive for the euro.
In the UK, on Wednesday we will have a string of indicators, with special interest on August’s Gross Domestic Product and the Industrial Production. However, with the Brexit negotiation gathering all the attention, the impact of these indicators is likely to be left in the background.
In the Japanese calendar, on Monday the Customs office will release the Trade Balance, which is expected to have returned to positive in August and the Current Account data although the impact on the yen is likely to be minor.