Strong Private Jobs Buoy Dollar; NFP Tomorrow

 

USD

The U.S. dollar trended slightly higher against most of its major rivals overnight as disappointing data and political risks abroad buoyed the greenback. Nevertheless, the U.S. dollar remains in weak ranges. Indeed, the Dollar Index reached a six-month low at the end of May and has only slightly rebounded.

The dollar found additional marginal support this morning as private job creation ticked higher in May. Private payrolls rose by 253K, according to APD. The print far exceeded expectations of a 180K rise and may foreshadow strong Non-farm payrolls tomorrow. NFP is always a much-anticipated release and tomorrow is no different. Current odds that the Fed will raise rates later this month sit at 85% and a strong jobs number can solidify those odds.

Other releases set for later this morning include Markit Manufacturing, ISM Manufacturing and construction spending.

 

EUR

The Euro slid slightly overnight but remains elevated versus the U.S. dollar. The common currency gained nearly 3.0% against the U.S. dollar through the month of May as domestic political turmoil held back the dollar. The Euro has started the month a bit softer after Italy and France released poor manufacturing data.

The European Central Bank will meet next week but is widely expected to hold its current policy. However, Bundesbank President Jens Weidmann said that the ECB will start debating a change in guidance to reflect the euro-area’s improving prospects. The comments did not have an immediate impact on the currency.

 

GBP 

The British pound continues to experience high inter-day volatility in the lead up to the snap parliamentary elections. Recent polls have shown a tightening which threatens the previously projected landslide victory for the Conservative party. Conservative PM Theresa May is hoping to consolidate power to improve her leverage in Brexit negotiations. May failed to take part in a televised debate of party leaders yesterday, giving fodder to her opponents. The election is held of June 8th and it is our opinion that she will remain the Prime Minister. However, the uncertainty should dampen the sterling in the near future.