Investing.com – The US dollar moved higher on Friday, extending October’s strength ahead of the release of the much-discussed payrolls report.
At 05:35 ET (09:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.1% to 104.025, following gains of more than 2% last month.
Dollar is awaiting payroll release
Data released Thursday showed that inflation according to the Fed’s target measure, the year-over-year increase in inflation, stood at 2.1% in September, compared with an upwardly revised 2.3% in August. and came close to the Fed’s 2.0% target.
Attention now turns to the US jobs report for October, due later in the session.
Economists estimate that this number has fallen to 106,000, compared to 254,000 in the previous month, while this number is expected to match the pace of 4.1% in August. Growth is also slowing to 0.3% month-on-month.
However, these numbers may be subject to volatility given the potential impact of recent devastating hurricanes and ongoing labor actions.
Rates are widely expected to be cut by a quarter of a percentage point next week, and the payrolls release should deliver a big surprise as futures contracts put the probability of a 25 basis point cut next week at 94.7%.
“We expect a mild negative impact on the dollar as some of the strength from the previous jobs report has been priced out and markets may push Fed prices back to 50 basis points of dovishness by year-end,” ING analysts said. remark.
Also important was the run-up to Tuesday’s presidential election, with the dollar benefiting from trades in which Republican candidate Donald Trump was expected to win.
However, the race with Vice President Kamala Harris appears very close, so a Democrat victory could lead to a flurry of trading.
Caution about ECB interest rate cuts?
In Europe, it traded 0.2% lower at 1.0861, giving back some of the euro’s gains from the previous session after data showed the euro zone accelerated more than expected in October, prompting caution on interest rate cuts from strengthens the European Central Bank.
The country has already cut interest rates three times this year and is widely expected to do so again as the year draws to a close.
“EUR/USD is starting to look a bit expensive in the upper half of the 1.08-1.09 range, and barring a push from US jobs data today, we are in favor of some depreciation of the pair on the US election day, with a move back to 1.0800 fully corresponds to a large interest rate differential in favor of the USD,” ING said.
rose 0.1% to 1.2917, with traders still digesting the latest UK budget as UK Chancellor of the Exchequer Rachel Reeves implemented huge tax hikes.
“We believe sterling could fall some further as the adjustment to higher bond supply runs its course, but with GBP short-term swap rates having been boosted by BoE repricing (now only one cut is expected in 2024), interest rate differentials may soon provide a floor for the pound,” ING said.
The yen drops lower
rose 0.5% to 152.72, with the yen giving up earlier gains after the Bank of Japan maintained ultra-low interest rates but said risks to the U.S. economy eased somewhat.
Governor Kazuo Ueda’s comments were seen as less forgiving than those made before the meeting, namely that the BOJ could afford to “spend time” examining the impact of risks such as US economic uncertainties.
rose 0.1% to 7.1242 despite China’s manufacturing activity returning to growth in October, a private sector survey showed on Friday.
The increase to 50.3 is largely in line with the official PMI published earlier this week.
