The preliminary employment data shocked the US dollar, as the US economy according to ADP added only about 99,000 jobs, which is lower than the market’s expectations of 144,000, as well as less than July’s data of 111,000 jobs.
Weekly claims data for 227,000 claims this week, compared to 231,000 expected by experts, and better than the previous weekly reading, which led to an average of 230,000 jobless claims in the 4 weeks.
At 15:45 local time, the US dollar index fell 0.25% to 101.01 and is close to falling below the 101st level after data on expectations of a 50 basis point cut that increased strongly with disappointing industrial and employment data.
A big cut is expected for the Fed?
The U.S. dollar stumbled against foreign currencies for most of this week after disappointing U.S. economic data raised the possibility of a hard-fought landing for the world’s largest economy, hence an aggressive approach by the U.S. central bank in easing monetary policy.
Tuesday’s ISM manufacturing survey showed that the sector remains in contraction territory, while the US job vacancies index fell to a 3-and-a-half-year low in July, suggesting the labor market is losing strength.
Traders now see a 45% chance that the Federal Reserve will cut interest rates by a significant 50 basis points when it meets later this month, and have priced more than 100 basis points of cuts by the end of the year.
This percentage is expected to rise after the current negative data represented by the employment data from ADP.
“Unless there is a sharp bearish error in some of today’s figures, we expect the DXY to trade within the 101-102 range. But the multi-week bias is bearish.’
Euro and Pound Rise
In Europe, the EUR/USD rose 0.1% to 1.1086, as the single currency rose on the back of an unexpected rise in German industrial orders in July.
Data on Thursday showed that German orders in July rose 2.9 percent from the previous month, a significant improvement from the expected 1.5 percent decline.
In addition, the statistics office revised the June data to show a 4.6% increase from the previous figure of 3.9%.
The Eurozone is due to release retail sales for July later in the session, and is expected to show a slight improvement after a 0.3% decline in the previous month.
“The EUR/USD pair has maintained the support level at 1.1040 this week and is likely to consolidate below the 1.1100 level – unless today’s US data surprises the downside,” ING added.
The sterling pair rose 0.1% to 1.3157, with the pair rising more than 3.5% over the past month, supported by expectations that the Bank of England will keep interest rates high longer than the US.
Yen nears one-month highs
In Asia, USD/JPY fell 0.1% to 143.62, as the yen received support from safe-haven demand, but also on expectations that the Bank of Japan’s impending rate hike will counter the wave of the global easing cycle.
The yen rose to a one-month high of 143.20 earlier in the session, and has risen so far the week by about 1%.
USD/CNY The yen fell 0.2% to 7.09999, hovering near its strongest level in more than a year.
Read also:Dollar moves in negative territory ahead of US private sector jobs data
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