The USD bears sniffed around for weaknesses in the economy and the EUR regained ground ahead of US employment data later this week, while gold spot prices inched higher.
It’s been quite a run for the USD since the Federal Reserve began raising interest rates in the second quarter. The US Dollar Index peaked in late September on the back of bullish sentiment around the currency. But as traders took in the latest hawkish rhetoric and downbeat economic forecasts from the US central bank, the USD became more vulnerable to doubts about the health of the US economy.
On Thursday, October 6, the ADP Employment Change for September will be released. The indicator is expected to have risen from 132K in August to 200K in September. So far this year, the resilience in the jobs market has supported sentiment around the USD in the face of considerable economic uncertainty about high inflation rates and a technical recession. Any disappointments in the results of the ADP trading news release may have a disproportionate impact on sentiment towards the US Dollar. Then again, if there are surprises to the upside, this may support the US Dollar.
The ADP announcement will be followed by the Non-Farm Payrolls (NFP) results for September on Friday, October 7. Market consensus is still being formed about the NFP figures after the Federal Reserve warned of a loss of around 1 million jobs if the recession in the US worsens. As risks rise towards the USD, another factor is the Federal Reserve’s next move in early November when the central bank is expected to continue its hawkish flightpath and raise interest rates towards its 4.4 percent target by the end of the year.
In other trading news, the Reserve Bank of Australia (RBA) increased its interest rate guidance by a lower-than-expected 0.25 percentage point to 2.6 percent. RBA Governor Philip Lowe cited a substantial increase in interest rates in a short period as the reason for the slower pace.
Other notable trading news events this week include the Reserve Bank of New Zealand (RNBZ) interest rate decision tomorrow, Wednesday, October 5. The central bank is expected to hike its key rate from 3 percent to 3.5 percent. Any unexpected developments could move the NZD currency pairs.
Finally, the ISM Services Purchasing Managers Index (PMI) for the US market will be released on Wednesday, October 5. The indicator is expected to have eased to 56 in September compared to 56.9 in August.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
