General market theme
Dollar continued its advance against the rest of the major currencies over the past 24 hours, after the beginning of the week when the US currency seemed to be slowing down against some of its peers. The dollar made good progress against all of its counterparts, with the exception of the British pound that managed to hold its own versus the buck and ended the day virtually unchanged against it.
Better than expected Consumer Confidence along with expectations for a bullish NFP report on Friday led investors to load up their dollar positions, driving the currency further higher. However, if the US employment figures on Friday disappoint we will witness a strong correction rally as investors will see their hopes for an aggressive rates policy disappear again.
Price action highlights
The euro remained under pressure, and while trading below the 1.1200 level the currency made it below the 1.1150 area over the course of the day yesterday. Disappointing inflation figures from Germany drove the euro lower while the dollar enjoyed fresh demand and took the rate to fresh lows.
The momentum to the downside is now slowing down and we could see some consolidation for now as we’re getting closer to the US NFP report, or even some profit-taking that might allow the single currency to breathe easier, but right now the euro remains pretty bearish so we might look to sell higher.
The cable performed pretty nicely against the strong dollar over the past couple of days. After the strong losses on the back of the Jackson Hole symposium the pound has been trading above the 1.3050 area, finding support day after day against the dollar that is making headway against the other majors.
Given the strength of the pound we could see further consolidation ahead of the NFP report later in the week, while a correction higher could also be in the cards while the UK currency remains firmly above the 1.3050 area.
Focus of the day
There’s a number of important reports scheduled for release this morning. The German Retail Sales will be followed by the German and Eurozone’s Unemployment figures while the Euro area’s inflation data will also be released early in the morning. Later in the day the release of the ADP Employment data will give us a heads up ahead of Friday’s important NFP report.
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