Dollar rises as traders await US payrolls data

Friday 08:20 BST

What you need to know

  • Markets steady ahead of release of non-farm payrolls
  • Dollar edges higher in early European trading
  • Oil prices move lower as Harvey impact continues

Overview

Markets remained cautious on Friday morning as the US took centre stage, with investors awaiting the release of payrolls data this afternoon.

Hot topic

The US dollar edged higher in early trading on Friday. The dollar index, which measures the greenback against a basket of major currencies, was 0.2 per cent higher in early trading to 92.809.

It had earlier this week hit its lowest level since 2015, but rebounded sharply after data showed US GDP growth on an annualised basis was revised upwards to 3 per cent in the second quarter — its fastest level in two years.

The dollar bounced back after falling in the final session of August. It has now endured its longest monthly losing streak in 14 years, with 6 straight months of declines.

The release of non-farm payroll data before the Wall Street open comes at a critical moment in the broader monetary environment, with investors expecting a gradual reversal of an era of ultra-loose policy across global central banks.

Economists expect US hiring cooled in August with forecasts of 178,000 jobs created in the month.

“US data overall have been very strong recently. Investors have ignored these data because the inflation numbers are surprising to the downside and several FOMC participants have pointed to rising inflation as a prerequisite for further hikes,” said Steven Englander at Rafiki Capital.

He argues that, in the longer term, the “fundamentals are better than the market is now pricing”.

Others suggested that the US was now taking centre stage in global trading. “Today’s session is all about the US releases and, we think, US markets — European bonds are unlikely to be in the driver’s seat. In fact, we think that this has been and will be a feature for some time to come despite the focus on the ECB and the requirement to taper,” wrote analysts at RBC Capital Markets.

Forex

The euro weakened 0.2 per cent against the dollar to $1.1887. The single currency came under pressure yesterday after a Reuters article indicated senior ECB officials are worried about its recent bout of strength, which is expected to put downwards pressure on inflation.

The pound weakened 0.2 per cent against the dollar to trade at $1.2908, but edged slightly higher against the euro.

Equities

The Euro Stoxx 600 opened 0.5 per cent higher, with banks gaining in early European trading.

Hong Kong’s Hang Seng was among the best performers in the region in early Asian trading on Friday, gaining 0.3 per cent, but later gave up its gains to trade slightly lower on the day. Macau casino operators had jumped after JPMorgan upgraded gambling stocks in the Chinese territory.

Japan’s Topix was up 0.1 per cent to trade at 1619.59.

Fixed income

Fixed income markets reflected caution ahead of this afternoon’s data release. The 10-year yield on US Treasuries added 1 basis point to 2.126

The Japanese 10-year bond yield, which moves inversely to prices, dipped below zero for the first time since November last year.

European bond yields were mostly static in early trading, with the German 10-year Bund yield trading at 0.36 per cent.

Commodities

Oil prices continue to see the impact of tropical storm Harvey. Almost one-third of refineries in Texas have been affected by the storm, and refineries still in operation are struggling to import crude. West Texas Intermediate fell 1 per cent to $46.77 a barrel after climbing 2.4 per cent in the previous session. Brent crude was down 0.6 per cent at $52.55 a barrel after gaining 2.9 per cent in the previous session.

The gold price fell 0.2 per cent to $1,318.8 per ounce after rising 1 per cent to $1,321.64 per ounce on Thursday.

For market updates and comment follow us on Twitter @FTMarkets

Additional reporting by Alice Woodhouse in Hong Kong

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