Dollar Declines; Impending Payrolls Data Warns of Risk

VOT Research Desk

Nov 4

Analytics and Recommendations

The Dollar Index, which measures the value of the dollar against a basket of six other currencies, was down 0.2% at 112.625 as of 03:55 ET (07:55 GMT), retreating from the nearly two-week high of 113.15 achieved yesterday.

The U.S. dollar dipped slightly in early European trade on Friday ahead of the critical U.S. employment report, but it is still on track to post a weekly gain following the hawkish stance of Federal Reserve Chair Jerome Powell.

Nevertheless, the index was anticipated to post its biggest weekly advance since September, at just under 2%.

When Powell said early this week that it was “extremely premature” to speculate when the Fed may suspend its rises following another 75 basis-point raise, he shattered hopes that the U.S. central bank would soon start slowing the pace of its increases.

As a result, traders have curbed some of these gains ahead of the release of crucial American employment statistics later on Friday. Economists anticipate that nonfarm payrolls expanded by 200,000 jobs in October. Data showing a still-healthier labor market would practically guarantee another significant interest rate increase in December.

After falling overnight to its lowest point in almost two weeks, the EUR/USD pair increased by 0.1% to 0.9758, making some progress in its recovery.

The statistics released on Friday revealed that German factory orders decreased 4.0% on a monthly basis in September, their sixth decline in the previous seven months and their greatest decline since March, making these improvements quite shaky.

This means that Germany, the largest economy and key engine of growth in the Eurozone, is inching closer to a recession.

services and the resulting composite Later in the session, the region’s PMI statistics are due; it is anticipated that both sectors will be firmly in contraction zone.

Even though the Bank of England raised interest rates by 75 basis points, the largest increase since 1989, GBP/USD rebounded from the previous session’s losses to reach 1.1224.

After the U.K. central bank offered up a pretty sobering assessment of Britain’s growth outlook, suggesting the country’s economy was already in a recession that could last two years, sterling was headed for a weekly loss of more than 3%, the largest since the market turmoil triggered by the disastrous “mini-Budget” in September.

The data showing that Japan’s services sector grew at its fastest rate in four months in October, helped by the removal of most COVID-related curbs, helped the yen trade 0.3% lower at 147.88.

However, the widening gap in interest rates between Japan and the United States has put pressure on the Japanese yen, putting it on track for a losing week.

AUD/USD rebounded from a near-two-week low to 0.6336, while USD/CNY fell 0.4% to 7.2702 on fresh rumors that the nation’s restrictive “zero-COVID” stance may soon be obsolete.

Daily Simple Moving Averages of Major Currencies