US Dollar to snooze from now until monthly US jobs report this Friday

US Dollar mixed as Greenback remains in ranges against most peers.
Traders are sending the Greenback higher as weekly jobless data comes in stronger.
US Dollar Index recovers and nears 107 again.

The US Dollar (USD) turns sideways and enters into a snooze fest after weekly US jobless data comes in strong again. The numbers from Wednesday are becoming yesterday's news. This puts the US Dollarindex (DXY) back to square one ahead of the always important US jobs report coming Friday.

Expect to see some mild moves later this evening with three Fed speakers ligned up. Overall the theme of this week appears to be that the Greenback might be at or starting to get over its peak with ADP and Institute of Management Supply (ISM) numbers on Wednesday showing some slowdown, though still growth, in the services sector. The current weekly jobless claims data supports that view with its minor uptick.

Daily digest: US Dollar easing ahead of NFP

The Challenger Job Cuts for September went from a previous -75,151 to a rise of 47,457.
The Initial Jobless Claims were expected to head from 204,000 to 210,000, instead went to 207,000 whiel the previous number was revised up to 205,000. The Continuing Claims was expected to head 1.67 million to 1.675 million. Instead it went to only 1,664,000 and the previous number got revised down to 1,665,000. The US people are still at work and no big layoffs seem to materialise.
For the Goods Trade Balance, a contraction was expected from -$65 billion to -$62.3 billion. The actual number was even stronger with -$58.3 billion.
Fed speakers might shed some light in this turbulent week with the Fed’s Loretta Mester from Cleveland speaking at 13:00 GMT. At 15:30 GMT, Thomas Barking from Richmond is due to speak, followed by Mary Daly from San Francisco near 16:00 GMT.
Equities are bored with the constant sell-off and are trying to turn the tide with some green figures: Both the Nikkei and the Topix indices in Japan advanced nearly 2% on Thursday. China is as good as flat for this Thursday. European stocks are flat, and US futures are mildly in the red, less than 0.50%.
The CME Group FedWatch Tool shows that markets are pricing in a 77% chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. The earlier rise in probability for a hike is being erased again as both ISM and ADP on Wednesday were coming in under expectations and might signal that the economy is starting to struggle with these elevated rates.
The benchmark 10-year US Treasury yield is peaking at 4.74%, off the highs from 4.85% earlier in the week.

US Dollar Index technical analysis: locked in until Friday

The US Dollar Index remains under a bit of pressure as traders are no longer awarding the Greenback for growing economic indicators when they are contracting against the previous print. Traders are starting to embrace the idea that the extensive growth cycle for the US might be nearing its end and is over its peak. That could translate into a substantially weaker US Dollar Index (DX), which might start to break down as more data points are issued in the coming days and weeks.

The US Dollar Index opened around 106.77, though the overheated Relative Strength Index (RSI) is acting as a cap that it is trading in an overbought regime. With 107.19 – the high of November 30, 2022 – tested on Wednesday, it will be important to see if DXY can get a daily close above that level. If that is the case, 109.30 is the next level to watch.

On the downside, the recent resistance at 105.88 should be seen as first support. Still, that barrier has just been broken to the upside, so it isn’t likely to be strong. Instead, look for 105.12 to do the trick and keep the DXY above 105.00.

Interest rates FAQs

What are interest rates?

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

How do interest rates impact currencies?

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

How do interest rates influence the price of Gold?

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

What is the Fed Funds rate?

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

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