Home Daily Commentaries USD continues post payrolls drop off

USD continues post payrolls drop off

Daily Currency Update

The USD lost more ground in both Asian and European markets to add on to the dollar sell off we saw Friday after the release of a slightly stronger than expected non-farm payrolls print.    Given that labor markets remained strong, but not overly so, markets are pricing in a 57% chance of a 50 basis point hike at the next Fed meeting.  Commodities remain strong as well and the futures contracts for all North American markets are trading up in pre-market trading as well, with the Dow already up over 100 points.  There are two key events this week that could have impact on the markets.  First on the docket is Tuesday’s mid-term election.  With the balance of power at stake in both the House and the Senate, a swing either way could impact the economic outlook from the government.  Thursday, we have the CPI inflation data expected to come out at 8%.  This announcement will provide clarity to what the Fed’s position might be heading into the next interest rate decision.

Key Movers

The euro saw a bounce up in the overnight markets after the German S&P construction PMI came in at 43.8, beating estimates.  The euro also gained on general risk appetite and the USD fell off with bonds selling.

The GBP has followed other major currencies in gaining against the USD.  There are some possible headwinds for the pound though as the new finance head, Jeremy Hunt is set to deliver an autumn statement to the office of budget responsibility. The document is thought to call for spending cuts of £35 Million along with £25 Million in new tax hikes.  This, paired with inflation over 10% and a recent interest bump of 75 points looks to make the cost of living in the UK much higher.

The Canadian dollar has joined other majors in gaining against the USD.  Oil is staying above July highs of $90 a barrel and stock markets are pointing to positive opens in early trading.  This shift in risk appetite and strength in commodities is helping the Canadian against the USD.

Expected Ranges

  • EUR/USD: 0.9899 - 0.9997 ▲
  • GBP/USD: 1.1298 - 1.1476 ▲
  • AUD/USD: 0.6407 - 0.6476 ▲
  • USD/CAD: 1.3470 - 1.3552 ▼