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US Dollar May Rise if ADP Data, Fed Comments Boost Rate Hike Bets

US Dollar May Rise if ADP Data, Fed Comments Boost Rate Hike Bets

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar may rise on supportive Fed commentary, ADP jobs report
  • Euro gains as Asia reacts after GDP growth hits six-year high in Q2
  • What will drive longer-term G10 FX trends? See our forecasts here

The Euro traded broadly higher against its G10 FX counterparts in Asian trade. A singular catalyst for the move higher is not readily apparent. Rather, the move may have reflected regional traders’ catch-up response to GDP data showing the trend growth rate hit a six-year high in the second quarter. With political risk receding and the ECB expected to start tapering QE, this might have made for a generally positive view.

The New Zealand Dollar underperformed, weighed down by a disappointing jobs report that undermined the probability of an RBNZ rate hike in the near term. The Japanese Yen declined as most regional equity benchmarks traded higher, tarnishing the appeal of the standby anti-risk currency. The Canadian Dollar continued to drift lower having plunged alongside crude oil yesterday.

From here, a quiet economic calendar in European trading hours is likely to put US news-flow in the spotlight. The ADP estimate of employment growth is expected to show the economy added 190k private-sector jobs in July, up from 158k in the prior month. The figures are an inconsistent predictor of upcoming official labor-market figures but may still influence Fed policy bets and the US Dollar in the near term.

Scheduled commentary from Loretta Mester and John Williams, presidents of the Fed’s Cleveland and San Francisco branches respectively, will also inform FOMC rate hike prospects. Rhetoric suggesting the economy is evolving in line with policymakers’ expectations may see traders upgrade the implied chance of further tightening in 2017, now at 41.8 percent, and lift the greenback.

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Asia Session

US Dollar May Rise if ADP Data, Fed Comments Boost Rate Hike Bets

European Session

US Dollar May Rise if ADP Data, Fed Comments Boost Rate Hike Bets

** All times listed in GMT. See the full DailyFX economic calendar here.

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

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