Traders Still Cautious About US Dollar Before NFP Data Release
Ahead of the release of August's non-farm payrolls data, the US dollar has fallen to the lowest levels seen in nearly one month against othe
Ahead of the release of August’s non-farm payrolls data, the US dollar has fallen to the lowest levels seen in nearly one month against other major currencies as investors cautiously wait to see if the report will offer clues on when the Fed could begin tapering asset purchases. At the time of writing, the US dollar index DXY is trading around 92.21.
After making gains over the past month, weakness in the greenback was driven by Fed Chair Powell’s comments a week ago at the Jackson Hole symposium, where he maintained his dovish stance and failed to offer a specific timeline for when the central bank would start reducing its monthly asset purchase program. In addition, Powell cautioned that the US labor market had to make more of a recovery before the Fed could even think of withdrawing support to the economy.
In addition, further weakness was driven after other Fed officials also shared worrying comments about the spread of the delta variant hurting economic recovery and possibly delaying plans to withdraw monetary stimulus measures. These developments sent the US currency down steeply, from a high of 93.734 down to near the 92 level at present.
After posting a solid improvement in June and July, investors are worried that the spread of the delta variant could have reduced the number of new jobs added to the US economy over the past month. The forecast of 750k jobs is already lower than July’s reading, which is putting pressure on the US dollar. However, a weaker than forecast reading could drive even more severe bearish moves in the currency, reinforcing Powell’s warning about the state of the labor market.
Jobs data released so far this week have thrown up mixed signals so far – the ADP private employment report showed a sharp drop in the number of jobs added. On the other hand, the weekly jobless claims figures released in the previous session showed that layoffs fell to the lowest levels seen in over 24 years.
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