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US Dollar May Rise as Payrolls Data Boosts Fed Rate Hike Bets

US Dollar May Rise as Payrolls Data Boosts Fed Rate Hike Bets

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar May Rise as Upbeat Jobs Data Boosts Fed Tightening Outlook
  • Australian Dollar Gains as RBA Policy Statement Weighs on Rate Cut Bets
  • See Economic News Directly on Your Charts with the DailyFX News App

A relatively lackluster economic data docket in European trading hours is likely to see investors looking ahead to July’s US Employment report. An increase of 225,000 in nonfarm payrolls is expected. The unemployment rate is seen holding at 5.3 percent, matching a seven-year low recorded in June.

US economic news-flow has increasingly outperformed relative to expectations since mid-May. That suggests analysts’ models are underestimating the vigor of recovery from the first-quarter downswing, opening the door for an upside surprise.

Such a result is likely to cement bets on a rate increase at the Fed’s September meeting, boosting the US Dollar at the expense of most of its top counterparts. The onset of risk aversion triggered by the prospect of US tightening even as the Eurozone and China remain sluggish, threatening global growth at large, may see outsized losses for commodity-bloc currencies but boost the Japanese Yen.

The Australian Dollar outperformed in overnight trade, rising as much as 0.5 percent on average against its leading counterparts. The move tracked a parallel move higher in front-end bond yields, pointing to ebbing RBA rate hike bets as the drive behind the move.

The improvement in investors’ outlook followed the release of the central bank’s monthly Statement on Monetary Policy. Officials upgraded their inflation outlook and argued that February and May rate cuts still working through into the broad economy, undermining the case for further easing.

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Asia Session

GMTCCYEVENTACTEXPPREV
23:30AUDAiG Perf of Construction Index (JUL)47.1-46.4
23:50JPYOfficial Reserve Assets (JUL)$1242.3B-$1242.9B
1:30AUDRBA Statement on Monetary Policy ---
1:30AUDHome Loans (MoM) (JUN)4.4%5.0%-7.3%
1:30AUDInvestment Lending (JUN)-0.7%--3.5%
1:30AUDOwner-Occupier Loan Value (MoM) (JUN)5.5%--7.1%
3:18JPYBOJ Annual Rise in Monetary Base ¥80T¥80T¥80T

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
5:45CHFUnemployment Rate (JUL)3.1% (A)3.1%Medium
5:45CHFUnemployment Rate SA (JUL)3.3% (A)3.3%Medium
6:00EURGerman Industrial Production (MoM) (JUN)-1.4% (A)0.2%Medium
6:00EURGerman Industrial Production (YoY) (JUN)0.6% (A)2.4%Medium
6:00EURGerman Trade Balance (JUN)24.0B (A)19.5BMedium
6:00EURGerman Current Account Balance (JUN)24.4B (A)11.1BMedium
6:00EURGerman Exports SA (MoM) (JUN)-1.0% (A)1.6%Medium
6:00EURGerman Imports SA (MoM) (JUN)-0.5% (A)0.7%Medium
6:45EURFrance Budget Balance YTD (JUN)--63.9BLow
6:45EURFrance Trade Balance (JUN)-3634M-4020MLow
6:45EURFrance Industrial Production (MoM) (JUN)-0.1% (A)0.4%Low
6:45EURFrance Industrial Production (YoY) (JUN)0.6% (A)2.5%Low
6:45EURFrance Mfg Production (MoM) (JUN)-0.7% (A)0.7%Low
6:45EURFrance Mfg Production (YoY) (JUN)0.1% (A)3.0%Low
7:00CHFForeign Currency Reserves (JUL)531.8B (A)516.0BLow
8:30GBPVisible Trade Balance (GBP/Mn) (JUN)-£9300-£8000Medium
8:30GBPTrade Balance Non-EU (GBP/Mn) (JUN)-£2400-£1570Medium
8:30GBPTrade Balance (GBP/Mn) (JUN)-£1700-£393Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.07741.08441.08851.09141.09551.09841.1054
GBPUSD1.52011.53701.54411.55391.56101.57081.5877

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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