Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Dollar Edges Higher on Hawkish Fed Comments; Labor Data Eyed

ForexAug 05, 2021 07:12
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters.

By Peter Nurse -- The dollar edged higher in early European trading Thursday, after hawkish comments from the Federal Reserve prompted traders to price in an earlier tightening of monetary policy.

At 1:55 AM ET (0555 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 92.302, pulling away from the one month low of 91.775 seen last week.

USD/JPY rose 0.2% to 109.66, EUR/USD traded 0.1% higher at 1.1839, and the risk-sensitive AUD/USD rose 0.2% to 0.7397, boosted by Australian trade data released earlier in the day which saw exports rising 4% month-on-month in June.

The dollar has been in a state of flux over the last couple of months, first rising after the June meeting of the Federal Reserve saw several members bring forward their timetable for interest rate hikes before slipping back after Chairman Jerome Powell stated last week that interest rate increases were still in the distance.

The currency took another turn after Fed Vice Chair Richard Clarida, usually seen as something of a dove, said Wednesday that conditions for an interest rate hike could be met in late 2022, setting the stage for a move in early 2023. Alongside three of his colleagues, Clarida also hinted that asset tapering could begin later in 2021 or early 2022.

Muddying the waters were mixed economic data Wednesday, with a surprisingly weak ADP report on private employment contrasting with the strongest ever reading for the U.S. ISM non-manufacturing PMI.

Still, it’s the labor market that traders are focusing on, with Fed members making it clear that improvement is needed there before any moves. 

Thursday sees the release of the weekly initial jobless claims data, at 8:30 AM ET (1230 GMT), with analysts looking for a figure of 384,000, a gradual improvement from the previous week.

However, it’s Friday’s nonfarm payrolls release which is attracting the most attention. The median forecast is for 870,000 jobs, but there is a broad range of estimates given the potential impact of the spread of the delta Covid-19 variant on the labor market.

“The outcome will have a significant impact on how the U.S. dollar trades for the next few weeks leading into the Federal Reserve’s Jackson Hole summit,” said Kathy Lien, an analyst at BK Asset Management. “If the data is good, the U.S. dollar will soar on the prospect of a taper announcement later this month. However, if payrolls disappoints, the U.S. dollar will slide as investors push their expectations for taper to September or later.” 

Elsewhere, GBP/USD rose 0.1% to 1.3893 ahead of the latest policy-setting meeting of the Bank of England later Thursday. The central bank could move a step closer to tightening monetary policy while raising its growth and inflation forecasts. 

“We believe that the BoE will grow more optimistic and less dovish, but policy-makers as a group will be divided on immediate tapering. At least one – and likely two – policy-makers will vote for tightening. If there are more than two, we could see a sharply positive reaction in sterling,” Lien added.

USD/BRL rose marginally to 5.1700 the day after Brazil’s central bank lifted its benchmark Selic interest rate by a full percentage point to 5.25% in order to fight heightened inflation levels.

Dollar Edges Higher on Hawkish Fed Comments; Labor Data Eyed

Related Articles

Dollar Edges Lower; Michigan Sentiment in Focus
Dollar Edges Lower; Michigan Sentiment in Focus By - Sep 17, 2021

By Peter Nurse - The dollar edged lower in early European trade Friday, but remained near a three-week high after strong U.S. economic data shifted tapering...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email