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US dollar surges ahead of US payrolls

currency-newsUS dollar surges ahead of US payrolls
The US dollar made significant gains yesterday following several better-than-expected US data releases.
 
Sterling also strengthened on Thursday and is steady so far this morning, with GBP/EUR stable at €1.1644 and GBP/USD holding at $1.4111. GBP/CAD has edged slightly higher to C$1.7101, while GBP/AUD and GBP/NZD are muted at AU$1.8404 and NZ$1.9729, respectively.
 
Looking ahead, after encouraging employment figures yesterday, the focus will be on the US non farm payrolls release today as May’s figures look set to recover from April’s dire reading.
 

What’s been happening?

The pound strengthened yesterday following an upwardly revised finalised UK services PMI, which indicated the fastest rate of growth in 24 years.
 
However, Sterling’s gains were limited by fears about rising cases of the Delta variant of coronavirus and the threat it poses to delaying the UK lifting lockdown restrictions later this month.
 
Meanwhile, the US dollar soared on upbeat US employment data and May’s record high ISM non-manufacturing PMI.
 
ADP employment change figures jumped higher than forecast, initial jobless claims fell below 400,000 for the first time since March 2020, and the ISM services PMI indicated another strong month of business growth.
 
The US dollar’s strength weighed heavily on the euro during yesterday’s session due to the negative correlation in the pairing.
 
However, the single currency tempered its losses as the finalised Eurozone services PMI came in slightly better-than-expected at its highest level of expansion since 2018.
 

What’s coming up?

The main focus today will be the US non farm payrolls data release. After April’s dire job creation figures and yesterday’s impressive employment data, USD investors will expect a more encouraging rise in employment.
 
Because of positive US data releases and recent Federal Reserve ‘taper talk’, investors will also look to a speech by Fed Chair Jerome Powell for hints at possible future monetary policy tightening.
 
Meanwhile, the euro could remain under pressure this morning as Eurozone retail sales are forecast to have contracted 1.2% in April.
 
EUR investors will also look to a speech by European Central Bank (ECB) President Christine Lagarde for insight into the central bank’s monetary policy now that Eurozone inflation has hit 2%, which is in the top end of its target range.
 
In the absence of notable UK data releases, headlines surrounding the Delta variant of coronavirus and the UK going ahead with easing lockdown in June will likely be the main drivers in GBP movement.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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