Dollar Takes A Breather Before Tomorrow's Jobs Data

 

USD

Despite a number of major data releases, geopolitical risks and monetary policy developments, the U.S. dollar has maintained a tight range so far this week. ADP’s private job data impressed yesterday, but failed to give the greenback much of a boost. The minutes of the last Fed meeting showed that most members are ready to begin reducing the bank’s 4.5 trillion dollar balance sheet, but the minutes were viewed as “not hawkish enough” to give the dollar any strength.

The movement overnight was also muted. President Trump will meet with Chinese leader Xi Jinping at the “Winter White House” in Florida today. There are many topics that could cause volatility for the U.S. dollar including trade, foreign exchange and the threat of North Korea. While campaigning, Trump promised to label China was a currency manipulator “on day one.” While Trump has taken a relatively more measured approach so far, some expect today’s summit to be tense.

There is no major economic data on today’s docket with only weekly jobless claims coming in right in line with expectations. Tomorrow’s non-farm payroll print is a near slam dunk to cause volatility in currency markets.

 

EUR 

The Euro experienced a sharp drop overnight before recovering all of its losses by this morning’s open. The Euro slip after European Central Bank President Mario Draghi tapped down expectations of future interest rate hikes. Draghi said inflation across the euro area isn’t yet strong enough and that “a reassessment of the current monetary policy stance is not warranted at this stage.”

The EUR/USD may remain range bound in the coming weeks as a slew of data, pending French elections and seesawing monetary policy outlooks pull the pair in opposite directions.

 

GBP 

The British pound is slightly lower this morning despite no data releases in the U.K. The modest weakness can be attributed to comments from Bank of England policy maker Gertjan Vlieghe that indicated inflation alone would not be enough to force a rate hike. He continued to explain that while consumer-price growth may be accelerating more than the BoE projected, there is no mechanical link to higher borrowing costs. The surge in prices may just mean the impact of the pound’s sharp decline is shitting home faster and could, potentially, fade faster as well.