FOREX-The U.S dollar hit a fresh three-month high

The U.S dollar hit a fresh three-month high versus other major currencies today, as traders wagered strong U.S labor data could lift it even further. The dollar index is on track for a further weekly gain - it's fourth in five weeks - of nearly 1%. It gained 0.1% on the day, hitting 92.699. The greenback has strengthened broadly since the U.S. Federal Reserve surprised markets last month by signaling it could tighten policy earlier than expected to curb inflation. The U.S. jobs report is due later today and is forecast to show a solid rise of 700,000, with traders braced for any surprises. The FX markets have certainly become more sensitive to incoming US economic data. That suggests to us that positioning in FX could still be short US dollars which are resulting in this further extension of dollar strength. A higher number in the employment report could fuel concerns of tighter Fed policy. The dollar has started July strongly; a U.S non-farm payrolls meet or beat today would maintain that momentum. Many people are now arguing over whether the dollar has indeed bottomed because at some point in 2023 the Fed is suggesting that it could be raising interest rates. Also, there's some nervousness about whether the dollar's going to start to behave in a more pro-cyclical manner, that is if the data is stronger than expected in the U.S. that the dollar really gets more strength from that. Euro edged lower with investors on hold ahead of U.S jobs data which might affect the Federal Reserve’s narrative about the economy and its monetary policy stance. More dovish signals came from the European Central Bank (ECB) with President Christine Lagarde saying the euro zone’s economy is beginning to rebound from a pandemic-induced slump but this recovery remains fragile. Meanwhile, concerns about the impact on the global economy of a possible monetary tightening in China and of the Delta variant are expected to keep risk sentiment on hold. Sterling fell yesterday after Bank of England Governor Andrew Bailey warned against over-reaction to rising inflation in Britain. Bailey said in his annual Mansion House speech that it was important to ensure that the recovery was not undermined by a premature tightening in monetary conditions, as a rise in inflation was likely to be temporary.

Euro

The single currency edged lower today with investors on hold ahead of U.S jobs data which might affect the Federal Reserve’s narrative about the economy and its monetary policy stance. More dovish signals came from the ECB President saying the euro zone’s economy is beginning to rebound from a pandemic-induced slump but this recovery remains fragile. Overall, the EUR/USD traded with a low of 1.1916 and a high of 1.1955 before closing the day around 1.1930 in the New York session.

Yen

The Japanese Yen trading within narrow ranges as investors looked to U.S nonfarm payrolls reports for clues on whether the Federal Reserve will start to reduce monetary stimulus sooner rather than later. Increased vaccinations that have led to more robust economic activity have helped the U.S recovery from the pandemic. Overall, the USD/JPY traded with a low of 110.67 and a high of 111.09 before closing the day around 110.84 in the U.S session.

British Pound

The British Pound fell after BoE Governor Andrew Bailey warned against over-reaction to rising inflation in Britain. Sterling was one of the worst-performing G-10 currencies last week after the BoE kept the size of its stimulus program unchanged and said inflation would surpass 3%, but that the climb further above its 2% target would be only temporary. Overall, the GBP/USD traded with a low of 1.3888 and a high of 1.3984 before closing the day at 1.3920 in the New York session.

Canadian Dollar

The Canadian Dollar may strengthen over the coming year, bolstered by higher oil prices and reduced stimulus from the Bank of Canada, but gains could stop short of the currency's recent six-year high, a Reuters poll showed. Canada is a major exporter of commodities, including oil, so the loonie is particularly sensitive to the global economic outlook. Overall, USD/CAD traded with a low of 1.2279 and a high of 1.2338 before closing the day at 1.2321 in the New York session.

Australian Dollar

The Australian Dollar traded slightly weaker in a subdued session today, as investors remained on edge ahead of the much-anticipated U.S employment report due later in the day. Data showed that Australian banks’ lending to investors for homes spiked 13.3% in May, a metric that analysts said was a portent of policy tightening by regulators amid sky-rocketing house prices. Overall, AUD/USD traded with a low of 0.7458 and a high of 0.7505 before closing the day at 0.7468 in the New York session.

Euro-Yen

EUR/JPY is trading below 14 and above 50, 100 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The Relative Strength Index is above 45 and lies above the neutral zone. In general, the pair has lost 0.04%.

Sterling-Yen

Currently, GBP/JPY is trading below 14 and above 50, 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 46 reading and lies above the neutral zone. On the whole, the pair has lost 0.37%.

Aussie-Yen

Currently, the cross is trading above 14, 50, and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 40 reading and lies above the neutral region. In general, the pair has gained 0.02%.

Euro-Sterling

This cross is currently trading below 14, 50, and 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 50 and lies below the neutral region. Overall, the pair has gained 0.34%.

Sterling-Swiss

This cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The Relative Strength Index is above 49 and lies below the neutral region. In general, the pair has lost 0.32%.

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.