Strong labour market report can support US dollar

Posted 01 November, 2018

The US dollar is losing grounds in the second half of the week, though ADP posted good enough labour market report. Earlier, traders used this report as a guideline for the outlook regarding the main report to be released on Friday. The private employment rate hiked by more than 200,000, which indicates that the US labour market in a good fettle now.

However, fluctuations of the sentiments fueled US dollar weakening. Demand for the greenback as well as risk aversion activities slackened. Extra pressure on the US Dollar index came from the soaring sterling on the recent progress in the Brexit. Specifically, it was reported that the UK and EU representatives agreed that the UK financial companies will maintain access to the EU market after the divorce. In this situation, the sterling hit 1.29, with the euro follows to toe reaching 1.14.

Still, the situation can change tomorrow after the release of the labour market report. In particular, if new jobs increase by some 200,000 and earnings rise faster, the greenback will enjoy buying boom on stronger forecasts of further monetary tightening by the US central bank.

With such scenario, the euro can lose the previous gains and fall down to the bottom of 1.13. The market may also keep track of the risk demand, as the euro-to-US dollar rate can weaken if the stock markets see further sales.

Previous forecast

02 November, 2018 17:30

← Good labour market report can promote interest rate upturn

The US labour market has posted a good performance in October, including non-farm employment figures, as the report of US Department of Labour released today showed. Average hourly earnings rose 3.1% y-o-y, which came in line with the expectations. For reference, the last-month increase was 2.8% y-o-y. As for the unemployment rate, it stays low in the USA, expectedly reaching 3.7% in October, unchanged from September. According to the American economists, a job increase of 200,000 adds some 3% to US GDP. In October, we see as much as 250,000 in the non-farm segment and this fact will support the GDP growth unless this rate is recalculated and downgraded afterwards. The Federal Reserve pays attention to such data as non-farm payroll while determining further revision of the interest rate. In this case, the observed good results can promote further upward revision of the rate during the upcoming meeting of the Fed open market committee. At the same time, the currency market hardly reacted to this report, the market analyst noted.

Good labour market report can promote interest rate upturn

Next forecast

30 October, 2018 17:04

Oil shortage fears fading away in the market →

Oil prices decreased at a moderate pace during the Monday trading following the rebound recorded late last week. Brent oil failed to hit the 78 handle, and quotes fell below 77, which has been observed today as well. The commodities market has to cope with several challenges at the beginning of this week. First of all, the USA keeps raising drilling activity, which indicates possible hikes of shale oil production. This week, the players seem to become more optimistic. Specifically, risk assets are on the rise now driven by Donald Trump's statements concerning the long-awaited trade deal with Beijing.

Oil shortage fears fading away in the market
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