- The US Dollar trades lower with ADP coming in softer.
- Services PMI's from S&P Global and ISM came in touch stronger.
- The US Dollar Index picks up and moves away from 100.00 level.
The US Dollar (USD) trades softer on Thursday, with a lot of data points set to be released in a condensed time span. The Greenback already eased on the back of the JOLTS Job Openings report on Wednesday, when the previous number was revised and the recent print for July came in below the estimation. It was enough for markets to price in more rate cuts by the Federal Reserve (Fed) and devalue the US Dollar on the back of narrowing the interest rate gap between the US and other countries.
On the economic data front, it will be up to experienced traders to navigate the set of data that will be released on Thursday to markets. The monthly ADP Employment Change for the private payrolls release already came in softer than expected, while the previous number got revised down as well. The Purchase Managers Index final readings for August from S&P Global and the Institute for Supply Managment (ISM) came in supportive for the Greenback and halted the intraday decline.
Daily digest market movers: Final Services readings help out
- At 11:30 GMT, the Challenger Job Cuts for August jumped up 193% from 25,885 to 75,891.
- At 12:15 GMT, the ADP Employment Change for August contracted from 122,000 to only 99,000. That is below the estimated elevated number at 145,000. To make matters even worse, the July number got revised lower from 122,000 to 111,000.
- At 12:30 GMT, the weekly Jobless Claims data came in:
- Initial Claims came in at 227,000, coming from 232,000 previously.
- Continuing Claims falls from 1.860 million to 1.838 million for this week.
- In the slipstream of the weekly Jobless Claims, the monthly Nonfarm Productivity and Unit Labor Costs for the second quarter were released. For the Nonfarm Productivity, a small uptick from 2.3% to 2.5%. The Labor Cost fell from 0.9% to 0.4%.
- At 13:45 GMT, S&P Global has delivered its final reading for the Services and Composite PMI numbers for August. Services came in a touch stronger, from 55.2 to 55.7. The Composite went from 54.1 to 54.6.
- The Institute for Supply Management (ISM) released its August reading for the Services sector:
- The PMI headline number went from 51.4 to 51.5.
- The Employment Index was at 51.1 the previous month, and came in at 50.2.
- The New Orders Index was at 52.4 in July, and came in stronger at 53.
- The Prices Paid Index was at 57, and saw a small uptick to 57.3.
- Equities jumped higher in the US after that ISM release, taking away some concerns on a possible recession in the US should those data points deteriorate as well.
- The CME Fedwatch Tool shows a 55.0% chance of a 25 basis points (bps) interest rate cut by the Fed in September against a 45.0% chance for a 50 bps cut. Another 25 bps cut (if September is a 25 bps cut) is expected in November by 30.2%, while there is a 49.5% chance that rates will be 75 bps (25 bps + 50 bps) below the current levels and a 20.3% probability of rates being 100 (25 bps + 75 bps) basis points lower.
- The US 10-year benchmark rate trades at 3.75%, just above the lowest level for this Thursday
US Dollar Index Technical Analysis: Small sigh of relief
The US Dollar Index (DXY) looks to be stuck in a tight range, remaining there for now after Tuesday’s data was unable to move the needle. With the JOLTS Job Openings report on Wednesday, the assumption is the same: any number that comes in substantially above or below consensus will move the DXY in either direction. Meanwhile, markets are giving a bigger chance to a 50 basis point rate cut by the Fed this month.
The first resistance at 101.90 is starting to look very difficult to break through after it already triggered a rejection earlier this week. Further up, a steep 2% uprising would be needed to get the index to 103.18. Finally, a heavy resistance level near 104.00 not only holds a pivotal technical value, but it also bears the 200-day Simple Moving Average (SMA) as the second heavyweight to cap price action.
On the downside, 100.62 (the low from December 28) could soon see a test in case data supports more rate cuts from the US Federal Reserve (Fed). Should it break, the low from July 14, 2023, at 99.58, will be the ultimate level to look out for. Once that level gives way, early levels from 2023 are coming in near 97.73.
US Dollar Index: Daily Chart
Banking crisis FAQs
The Banking Crisis of March 2023 occurred when three US-based banks with heavy exposure to the tech-sector and crypto suffered a spike in withdrawals that revealed severe weaknesses in their balance sheets, resulting in their insolvency. The most high profile of the banks was California-based Silicon Valley Bank (SVB) which experienced a surge in withdrawal requests due to a combination of customers fearing fallout from the FTX debacle, and substantially higher returns being offered elsewhere.
In order to fulfill the redemptions, Silicon Valley Bank had to sell its holdings of predominantly US Treasury bonds. Due to the rise in interest rates caused by the Federal Reserve’s rapid tightening measures, however, Treasury bonds had substantially fallen in value. The news that SVB had taken a $1.8B loss from the sale of its bonds triggered a panic and precipitated a full scale run on the bank that ended with the Federal Deposit Insurance Corporation (FDIC) having to take it over.The crisis spread to San-Francisco-based First Republic which ended up being rescued by a coordinated effort from a group of large US banks. On March 19, Credit Suisse in Switzerland fell foul after several years of poor performance and had to be taken over by UBS.
The Banking Crisis was negative for the US Dollar (USD) because it changed expectations about the future course of interest rates. Prior to the crisis investors had expected the Federal Reserve (Fed) to continue raising interest rates to combat persistently high inflation, however, once it became clear how much stress this was placing on the banking sector by devaluing bank holdings of US Treasury bonds, the expectation was the Fed would pause or even reverse its policy trajectory. Since higher interest rates are positive for the US Dollar, it fell as it discounted the possibility of a policy pivot.
The Banking Crisis was a bullish event for Gold. Firstly it benefited from demand due to its status as a safe-haven asset. Secondly, it led to investors expecting the Federal Reserve (Fed) to pause its aggressive rate-hiking policy, out of fear of the impact on the financial stability of the banking system – lower interest rate expectations reduced the opportunity cost of holding Gold. Thirdly, Gold, which is priced in US Dollars (XAU/USD), rose in value because the US Dollar weakened.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
![Australian Dollar breaks two-day winning streak despite the hawkish RBA](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/AUDUSD/australian-currency-23690700_XtraSmall.jpg)
Australian Dollar breaks two-day winning streak despite the hawkish RBA
The Australian Dollar (AUD) halts its two days of gains against the US Dollar (USD) as traders adopt caution ahead of the release of US Nonfarm Payrolls (NFP). This data may offer more cues on the potential size of an expected rate cut by the Federal Reserve (Fed) this month.
![Japanese Yen extends winning streak as US Dollar remains subdued due to dovish Fedspeak](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/USDJPY/japanese-yens-7972406_XtraSmall.jpg)
Japanese Yen extends winning streak as US Dollar remains subdued due to dovish Fedspeak
The Japanese Yen (JPY) continues its winning streak for the fourth successive session as rising real wages in July fuel speculation that the Bank of Japan (BoJ) may introduce another interest rate hike before the end of 2024. Additionally, the USD/JPY pair has encountered headwinds due to a softer US Dollar (USD), driven by dovish comments from Federal Reserve (Fed) officials.
![Gold price bulls turn cautious near $2,525 hurdle ahead of US NFP report](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/stack-of-golden-bars-in-the-bank-vault-60756080_XtraSmall.jpg)
Gold price bulls turn cautious near $2,525 hurdle ahead of US NFP report
Gold price (XAU/USD) climbed closer to the $2,524-2,525 supply zone on Thursday amid some follow-through US Dollar (USD) selling, led by bets for a larger interest rate cut by the Federal Reserve (Fed) later this month.
![Why Ethereum is underperforming Bitcoin, Solana, Nvidia, Meta, Apple and others](https://editorial.fxstreet.com/images/Markets/Currencies/Cryptocurrencies/Coins/Ethereum/ethereum_XtraSmall.jpg)
Why Ethereum is underperforming Bitcoin, Solana, Nvidia, Meta, Apple and others
Ethereum (ETH) is down 2% on Thursday following a key analysis showing the top altcoin has underperformed assets, including Bitcoin, Solana, Nvidia, Meta, Apple, Gold and others. CryptoQuant analysts and the F2pool co-founder weigh in on why ETH has underperformed and what investors should expect.
![ADP Employment Change Preview: US private sector expected to add 145K new jobs in August](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/employment-51256484_XtraSmall.jpg)
ADP Employment Change Preview: US private sector expected to add 145K new jobs in August
ADP Employment Change is forecast to arrive at 145,000 in August. Labor market conditions could influence the Fed’s policy outlook. The US Dollar stays resilient against its rivals after posting large losses in August.
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.