US Dollar May Rise as Jobs Data Boosts Fed Rate Hike Prospects

2018-08-03 06:30:00 Ilya Spivak

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TALKING POINTS – US DOLLAR, EMPLOYMENT, FED, EURO, BRITISH POUND, PMI
ASIA PACIFIC TRADING SESSION
EUROPEAN TRADING SESSION
FX TRADING RESOURCES

TALKING POINTS – US DOLLAR, EMPLOYMENT, FED, EURO, BRITISH POUND, PMI

Euro, British Pound unlikely to find catalysts in PMI roundup
US Dollar may rise as jobs data boosts Fed rate hike prospects
NZ Dollar falls as RBNZ outlook shrivels, Aussie Dollar higher

A steady stream of PMI surveys are unlikely to inspire significant reactions from the Euro and the British Poundconsidering their limited implications for near-term ECB and BOE policy implications. The former central bank appears to be on auto-pilot at least through year-end while the latter signaled just yesterday that its responsiveness to incoming economic data has been tempered by Brexit-linked uncertainty.

That puts July’s US employment report firmly in focus. A broadly on-trend set of outcomes is expected, with a 193k gain in nonfarm payrolls accompanied by steady wage inflation at 2.7 percent on-year and a slight downtick in the jobless rate to 3.9 percent. To the extent that these results mark continuity, they also endorse the Fed’s hints at two more hikes are appropriate this year. That bodes well for the US Dollar.

The New Zealand Dollar underperformed in otherwise muted Asia Pacific trade. The move tracked a dovish shift in the priced-in RBNZ policy outlook (as reflected in 30-day bank bill futures). As it stands, markets envision a rate hike no sooner than the fourth quarter of next year. The Australian Dollar edged up after local retail sales data topped economists’ forecasts.

See the latest US Dollar forecast to learn what will drive prices in the third quarter!