The euro and pound are set to finish the week with gains against the dollar, as global bond yields and the dollar itself have fallen. The decline in the dollar comes after a recent strong rally, with the dollar index on track for its third week of losses in the last 16. The fall in U.S. yields was triggered by the U.S. Treasury Department announcing smaller-than-expected increases in longer-dated Treasury supply, as well as Federal Reserve Chair Jerome Powell’s comments suggesting that the Fed is finished raising interest rates. The benchmark U.S. 10-year treasury yield is heading for a 17 basis point weekly fall, the most in a week since July.
The most important event of the week, the U.S. nonfarm payrolls data, is set to be released at 1230 GMT and could potentially change the current narrative. If there is a significant miss in the data, with 100,000 fewer jobs than expected, there is a chance that people could start selling dollars. However, if the data comes in strong, there may be a return to buying dollars.
Analysts are predicting that U.S. nonfarm payrolls likely increased by 180,000 jobs in October, a slowdown from the 336,000 jobs added in September. This decrease is partly due to strikes by the United Auto Workers union against Detroit’s “Big Three” car makers, which have impacted manufacturing payrolls.
The Bank of England also made headlines this week by joining other major central banks in keeping interest rates steady. While the bank emphasized that it does not anticipate cutting rates in the near future, its decision has further contributed to the rally in bonds.
The Japanese yen experienced a volatile week, reaching a one-year low against the dollar and a 15-year low against the euro after the Bank of Japan adjusted its yield curve control policy. Sources familiar with the central bank’s thinking revealed that the governor of the Bank of Japan, Kazuo Ueda, plans to continue dismantling the country’s ultra-loose monetary policy and aims to exit the accommodative regime next year.
The Australian and New Zealand dollars have both performed well this week, with gains of 1.6 percent, marking their best weekly performance since mid-July. On the other hand, the Swiss franc, which benefited from a flight-to-safety bid in October, has weakened this week, resulting in a 0.5 percent weekly gain for the dollar against the franc.
As traders and investors eagerly await the release of the U.S. nonfarm payrolls data, the outcome will likely have a significant impact on the future direction of the euro, pound, and dollar. With the potential for surprises in the data, the forex market remains uncertain, but traders will closely analyze the results to determine their trading strategies.
More detail via CNA here… ( Image via CNA )