Historic Dollar Surge Plays into the Hands of the Fed

USA jobs data beats forecasts, whilst the ISM manufacturing metric disappoints, U.S. dollar rises after FOMC decision and Jerome Powell statement.

May 2 • Forex Trading Articles, Morning Roll Call • 2848 Views • Comments Off on USA jobs data beats forecasts, whilst the ISM manufacturing metric disappoints, U.S. dollar rises after FOMC decision and Jerome Powell statement.

On Friday May 3rd, at 13:30pm U.K. time, the latest NFP jobs data will be published. In the same week as the NFP data is published, the latest ADP payrolls data is usually released on the preceding Wednesday. On Wednesday May 1st, the ADP data came in at 275k for April, ahead of the Reuters forecast of 180k. This reading is often regarded as a portent of the NFP number; historically a high ADP reading is matched by a high NFP result. Despite the positive result the SPX and DJIA indices sold off sharply during the New York session, closing down -0.61% and -0.75% respectively, as the latest ISM manufacturing metric posted a two and a half year low, missing the forecast by some distance, coming in at 52.8 for April.

The ISM data series is highly respected and ranks as high impact, due to it illustrating the overall strength of the USA manufacturing base. And whilst the main U.S. equity indices are continuing to reach record highs during recent sessions, the (arguably) real economy still appears to be fragile, irrespective of the volume of new jobs recently created. That fragility might have been on the mind of the FOMC heads of the regional Federal banks, as they voted to keep the USA key upper bound interest rate at 2.5%. The statement from the Fed chair Jerome Powell was neutral, stating that USA economic activity has been rising at a solid rate and that the labour market still remains strong.

The Committee also reaffirmed its position that it will remain cautious and patient regarding any further policy firming; raising rates. The U.S. dollar whipsawed in narrow ranges versus several peers, shortly after the press conference, both USD/JPY and USD/CHF rose from their previous positions of posting daily lows, to break up through the daily pivot points, at 22:30pm U.K. time both USD/JPY and USD/CHF traded close to flat. The DXY traded up 0.18% at 97.65. Crude oil inventories in the USA rose markedly in the USA according to the latest DOE data, WTI oil traded down -0.45% as a consequence, at 63.62 per barrel.

Brexit was knocked off the top of the U.K. political agenda on Wednesday, as the leading news concerned the former minister of defence being sacked by the prime minister, due to her conviction after an investigation, that he’d leaked official secrets to the press. Breaking the official secrets act, the OSA, is a criminal offence and speculation began to develop in Westminster regarding how far this scandal has yet to run, based on the former minister also vehemently protesting his innocence.

Sterling and the main U.K. equity market the FTSE 100, was unaffected by the news, which came late in the afternoon, GBP/USD gave back some of its daily gains late in the New York session, at 22:40pm the major pair traded at 1.304, up 0.15%, falling back from R1. Sterling made gains throughout the day versus the majority of its peers, registering its largest gains versus: CAD, AUD and NZD.

Wednesday was a relatively quiet day for economic calendar news relating to the Eurozone, EUR/USD whipsawed in a tight range shortly after the FOMC press conference, giving up the daily gains which had seen price action take out the second level of resistance, R2, the major pair ended the day trading at 1.198, close to flat on the day. Versus its other peers the euro experienced mixed fortunes on Wednesday, closing the day out up versus AUD, ZND, and CAD.

Thursday’s calendar events begins with various manufacturing European Markit PMIs for: Switzerland, Italy, France, Germany and the wider E.Z. trading bloc. Reuters are forecasting the majority of the readings for April to remain unchanged from the March reading. Any misses or beats could impact on the value of the euro.

At 12:00pm U.K. time, the latest decision on the base interest rate for the U.K. from the Bank of England’s MPC, will be revealed. The consensus is for a hold at 0.75%. Mark Carney’s press conference half an hour later, will be the focus of attention and the period when the value of sterling may come under increasing speculation, particularly if there’s any change to the current monetary policy.

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