Dollar eases from two-week high ahead of jobs report
NEW YORK (Reuters) – The dollar eased off its high of more than two weeks earlier on Wednesday as US economic data was a little softer than expected and traders awaited a report on key jobs at the end of the week .
U.S. private payrolls grew the most in seven months in April, ADP data showed on Wednesday, as companies increased output to meet increased demand amid massive government spending and the increase in vaccinations against COVID-19. But the 742,000 private jobs created are lower than the 800,000 jobs expected by economists in a Reuters poll.
In the US service sector, activity slowed in April from a record high in March, likely due to input shortages amid high demand, according to data from the Institute for Supply. Management.
“This is certainly worrying for US dollar traders and preventing them from restoring long dollar positions ahead of nonfarm payrolls,” Kathy Lien, managing director of BK Asset Management, said of the data.
The median forecast in Friday’s jobs report is an increase of 978,000, but the estimates reach 2.1 million.
“There’s a good chance it will exceed one million, but looking at some of the major indicators of the economy, recovery and labor market, we don’t see this disproportionate force that everyone had anticipated and which is holding back the dollar, ”Lien said.
The dollar index, which measures the greenback against a basket of comparable currencies, was last at 91.319 after peaking at 91.436 earlier in the session, its highest since April 19.
The previous rebound was in part driven by comments from US Treasury Secretary Janet Yellen that rate hikes may be needed to keep the economy from overheating.
Yellen later downplayed their importance, but even the slightest mention of US tightening has a disproportionate impact on markets that have become so dependent on monetary stimulus.
Three Fed officials spoke on Wednesday, while Federal Reserve Bank of Chicago Chairman Charles Evans said while he was more optimistic about U.S. economic growth than he was there a few months away, he expects monetary policy to remain ultra-easy for some time.
Boston Federal Reserve Bank Chairman Eric Rosengren said inflation would be temporarily skewed this spring as the U.S. economy operated on imbalances caused by the pandemic, but the pressures were expected to be short-lived and should not lead to a decline in monetary policy.
Cleveland Fed Chairman Loretta Mester said more progress would be needed in the labor market before the conditions for the Fed to reduce its extended support are in place.
The Fed has said it will not raise its benchmark federal funds rate until 2023, but the reactive part of the commercial rate yield curve is 10 years or a bit longer, analyst Joseph Trevisani said. principal at FXSTREET.COM.
“The Fed doesn’t have to change its mind about the fed funds rate. All it has to do is come off when the credit market starts to pull 10 years down to 2%, which I think it will, ”Trevisani said. “As long as Treasury rates pick up, they’ll take the dollar with them.”
The Canadian commodity dollar hit a three-year high against the greenback, helped by rising crude prices and optimism about the global economic recovery.
The dollar gained 0.12% against the euro to $ 1.1999, its lowest against the greenback in more than two weeks.
Trade was limited overnight, with Japan and China on vacation, but the New Zealand dollar jumped 0.83% to $ 0.72080 on stronger-than-expected employment data. The Australian dollar rose 0.4% to $ 0.7742.
The British pound traded 0.12% to $ 1.39020 per day ahead of the Bank of England meeting, where some expect some to announce a cut to its bond buying program . [GBP/]
Reporting by John McCrank in New York; additional reporting by Ritvik Carvalho in London; Edited by Mark Potter, Will Dunham, William Maclean