USD Holds Gains Ahead of Slew of Data Including NFP

USD

The U.S. dollar remained firm overnight, holding on to recent gains against most of its rivals, save the Euro and Swiss Franc. The dollar found some support overnight after Federal Reserve Bank of Chicago President Charles Evans said he expects the central bank to raise interest rates in December while speaking in New Zealand.  According to Fed Funds Futures, traders are pricing in a 61% chance of a hike by the end of the year.

The Fed has remained that it is data-dependent so today’s slew of data may affect interest rate expectations.  The first reading was underwhelming.  Private companies added only 154K jobs in the month of September, according to ADP. The print failed to meet expectations of 165K.  Last month’s reading was downwardly revised by 2K and the dollar traded slightly softer following the data.

Later this morning, Markit and ISM service data are slated to cross the wire.  Factory orders are expected to be sluggish and durable goods orders, an indicator of long term investment, is forecast to register no growth.   Friday’s non-farm payrolls remain the largest risk event on this week’s calendar.

EUR

To casual observers, the Euro has remained in rather tight ranges over the past few weeks.  However, yesterday the EUR/USD pair saw considerable volatility.  The Euro opened the day lower against its American counterpart on general dollar strength derived from the policy divergence narrative.  However, the Euro’s fortunes quickly turned around on the release of news that the European Central Bank is considering tapering their quantitative easing program. The unnamed source mentioned the possibility of reducing QE by 10 billion a month, but did not provide a timeline as to when the tapering could start.

The rumor allowed the Euro to cover nearly 100 basis points against the U.S. dollar and settle back into last week’s familiar ranges.

GBP

The British pound continued its slide against its rivals overnight, as the currency appears unable to carve out a bottom.  Concerns over a “hard Brexit”, or limited access to Europe’s single market, have triggered additional selling of an already beleaguered currency.  The sterling is currently trading at its weakest level against the Euro in 5 year and 31 years versus the greenback.

The pound found little relief even as economic data showed that the services sector grew more than forecast last month.  HIS Markit said its Purchasing Managers Index dipped to 52.6, but above the 52.2 expected by economists.