The dollar is still retaining its good run of form against all major currencies, however it did tick back a little during trading yesterday afternoon.
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Philadelphia Federal President Patrick T Harker commented to Bloomberg yesterday that he felt the pace of interest rate hikes from the Fed may well start to slow a little.
It has been the constant hiking of rates that has led to a lot of USD strength over the course of 2018, but should the pace of these hikes start to drop then the dollar may weaken a little in the coming months.
An interest rate hike generally will strengthen a currency as it makes it more attractive to investors, and we have witnessed a huge flow of money out of the ‘riskier’ and emerging market currencies into the perceived ‘safer’ USD over the course of the year due to the increased returns offered by the US.
Yesterday afternoon saw a flurry of further positive economic data from the States, with manufacturing, services and employment data all coming out better than expectations.
This afternoon we have more jobs data and then tomorrow we have Non-Farm Payroll data which can be one of the largest market movers of the month.
The reason this can lead to a volatile dollar (and indeed other major currencies) is because the Non-Farm payroll data can impact global attitude to risk. Quite often analyst’s predictions can be a long way off of the figure released, so generally you'll find that the market corrects itself accordingly once the data comes out.
The Non-Farm payroll figure measures the number of people in non-agricultural employment in the States (because agricultural employment can be seasonal) and is a good barometer as to how the U.S jobs market is performing.
Personally, I would expect the result of this (and any Brexit news) to set the trend for the final few hours of the week so if you have an exchange to carry out involving the US dollar (or any currency pegged to the Dollar) then it is certainly one to watch.
To contact one of our experienced account managers to discuss dollar exchange rates feel free to call our trading floor on 01494 725 353.
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