FX Awaits US Jobs

The dollar is firmer against the majors by the New York afternoon following sharp swings in the morning to hover near similar levels from the previous session. The greenback sold off heavily across the board following a sharply higher than expected weekly jobless claims reading, which surged to 448k from 406k in the previous week due to “special factors”, prompting the dollar to lose footing to the just beneath the 1.57-handle. However, the losses were short-lived as traders took to the sidelines ahead of Friday's key July labor report. The dollar also benefited from pullbacks in both spot gold and crude oil, which reversed their earlier session's gains.

The advanced reading for Q2 GDP was slightly less than forecast at 1.9%, marginally missing estimates of 2%, but improving from the previous reading of 1.0%. The employment cost index held steady at 0.7%, while the GDP deflator fell sharply to 1.1% from 2.7% in the previous quarter. Meanwhile, the July Chicago PMI unexpectedly improved above the 50-level to 50.8, versus 49.6 in June.

Traders will turn to tomorrow's key labor report, with estimates calling for the July unemployment rate to edge up to 5.6% from 5.5% a month earlier. The non-farm payrolls figure is seen remaining in negative territory for the 7th consecutive month, with forecasts calling for an increase in jobs lost to 75k in July, versus a 65k job loss a month earlier. The recent reports provided conflicting signals, with Wednesday's ADP private sector payrolls report better than expected, revealing an increase of 9k jobs versus a loss 79k in the previous month while today's weekly jobless claims unexpectedly spiking sharply higher.

We expect a quiet trading session heading into tomorrow's data with the major currency pairs likely to consolidate within range. A non-farm payrolls reading in the region of over 100k loss will promptly spark the greenback to relinquish its recent gains, while a positive reading will sharply extend the dollar's gains and provide sufficient impetus to break through the 1.55-level against the euro. Also due out tomorrow is July manufacturing ISM, which is forecasted to reverse last month's improvement above the 50-level, contracting to 49.8.

MG Financial Group
http://www.mgforex.com

Legal disclaimer and risk disclosure

MG Financial Group, or any of its related companies, will not be held responsible for the reliability or accuracy of the information available on this site. The content provided is put forward in good faith and believed to be accurate, however, there are no implicit guarantees of accuracy or timeliness.