Dollar Edges Higher Ahead of U.S. Employment Release

Forex
© Reuters.  © Reuters.

By Peter Nurse

Investing.com – The dollar traded marginally higher in early European trade Friday, with traders cautious ahead of the release of U.S. jobs data that could shed some light on the strength of the country’s economic recovery.

At 2:50 AM ET (0650 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 92.838, on course for its best week in more than two months. 

The dollar has managed to halt its recent slide, but the overall sentiment remains one of weakness given the Federal Reserve has strongly implied that it intends to keep rates low for a very long time. On top of this, there remain concerns about the strength of U.S. economic growth.

“If real interest rates are one of the best gauges of monetary policy settings then U.S. monetary conditions are now the loosest they have been since 2012,” said ING analyst Chris Turner, in a research note.

“The dollar bear trend has only just begun,” he added. “U.S. fiscal policy paralysis and a change in monetary policy strategy from the Federal Reserve make the case for the dollar bear trend extending well into next year.”

The bank has raised its end year 2021 forecast to 1.25 from 1.10 previously.

One gauge of the strength of the U.S. recovery will be the employment market, and data due later Friday is expected to show U.S. grew by 1.4 million in August, which would be slower than the 1.763 million jobs created in the previous month.

Employment would still be about 11.5 million below its pre-pandemic level, and the slowing growth could add pressure on U.S. policymakers to restart stalled negotiations for another fiscal package.

Elsewhere, EUR/USD dropped 0.1% to 1.1839, extending a pullback from a two-year high hit on Tuesday.

German rose by a smaller-than-expected 2.8% on the month in July, although an upward revision to the June numbers left the actual level not far off consensus forecasts, according to Pantheon Macroeconomics analyst Claus Vistesen. 

dropped 0.1% to 1.3272, retreating from its highest level in almost a year due to a lack of progress in trade negotiations between Britain and the European Union.

Senior U.K. officials see only a 30%-40% chance that there will be a Brexit trade agreement with the European Union due to an impasse over state aid rules and fisheries rights, The Times reported Friday.

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