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Forex Today: Key US data releases to drive USD valuation
Here is what you need to know on Thursday, September 5:
The US Dollar (USD) finds it difficult to stage a rebound after weakening against its major rivals on Wednesday. The US economic docket will feature ADP Employment Change for August, weekly Initial Jobless Claims and August ISM Services PMI data later in the day. Ahead of these releases, Eurostat will publish Retail Sales data for July.
On Wednesday, the data published by the US Bureau of Labor Statistics showed that job openings stood at 7.67 million on the last business day of July. This reading came in below the market expectation of 8.1 million and caused the USD come under selling pressure. After touching a fresh two-week high at 101.91 on Tuesday, the USD Index turned south and lost 0.5% on Wednesday. In the European morning, the index holds steady above 101.00. Meanwhile, the benchmark 10-year US Treasury bond yield dropped below 3.8% and Wall Street's main indexes closed the day mixed. Early Thursday, US stock index futures trade marginally lower.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.33% | -0.12% | -1.82% | 0.20% | 0.74% | 0.75% | -0.30% | |
| EUR | 0.33% | 0.23% | -1.51% | 0.51% | 1.08% | 1.07% | 0.02% | |
| GBP | 0.12% | -0.23% | -1.74% | 0.27% | 0.82% | 0.87% | -0.23% | |
| JPY | 1.82% | 1.51% | 1.74% | 2.00% | 2.64% | 2.75% | 1.48% | |
| CAD | -0.20% | -0.51% | -0.27% | -2.00% | 0.59% | 0.55% | -0.49% | |
| AUD | -0.74% | -1.08% | -0.82% | -2.64% | -0.59% | -0.02% | -1.01% | |
| NZD | -0.75% | -1.07% | -0.87% | -2.75% | -0.55% | 0.02% | -1.04% | |
| CHF | 0.30% | -0.02% | 0.23% | -1.48% | 0.49% | 1.01% | 1.04% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
While speaking at an event organized by the Anika Foundation earlier in the day, Reserve Bank of Australia (RBA) Governor Michele Bullock said that they need to see inflation slowing in the actual numbers before acting on interest rates. AUD/USD showed no reaction to these remarks and was last seen moving sideways above 0.6700.
The data from Germany showed on Thursday that Factory Orders expanded by 2.9% on a monthly basis in July. This reading came in much better than the market expectation for a contraction of 1.5%. Following Wednesday's rebound, EUR/USD holds its ground in the European morning and trades slightly below 1.1100.
Bank of Japan (BoJ) Board Member Hajime Takata noted on Thursday that Japan's current real interest rate is below estimated natural rate of interest, adding that this means monetary conditions remain accommodative. USD/JPY registered large losses for the second consecutive day on Wednesday and lost over 2% in that time frame. The pair stays under modest bearish pressure and trades at its lowest level since early August at around 143.50.
GBP/USD benefited from the selling pressure surrounding the USD and closed in positive territory on Wednesday. The pair holds steady near 1.3150 on Thursday.
Gold registered small gains on Wednesday and continued to stretch higher during the Asian trading hours on Thursday. XAU/USD was last seen trading above $2,500.
Employment FAQs
Labor market conditions are a key element in assessing the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels because low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given their significance as a gauge of the health of the economy and their direct relationship to inflation.
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