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Nonfarm payrolls:US dollar’s final hurdle of the week

H.S. Borji
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Nonfarm payrolls:US dollar’s final hurdle of the week

The US dollar index was unchanged Thursday, as the forex market absorbed a steady stream of economic data ahead of nonfarm payrolls on Friday.

The markets have been apprehensive to bid up the US dollar, as investors struggle to balance latest rounds of economic data against a disappointing first quarter that witnessed GDP expand at its slowest rate since the fourth quarter of 2012.

The US economy expanded 0.1 percent annually in the first quarter, down from a 2.6 percent annual pace in Q4, the Commerce Department reported Wednesday.

The greenback could get the temporary reprieve it desperately needs Friday when the Labor Department reports on nonfarm payrolls. Estimates about the number of jobs created in April vary widely. A consensus range of economists polled by Bloomberg shows estimates between 190,000 and 279,000. The median estimate is 215,000. Economists polled by Reuters say the US economy generate 210,000 jobs in April. The unemployment rate is expected to have dipped from 6.7 percent to 6.6 percent.

Average hourly earnings are expected to have risen 0.2 percent in April, following no change the prior month. Average weekly hours are expected to have remained unchanged at 34.5.

Faster job creation, it is believed, could deepen talks at the Federal Reserve about a possible rate hike next year. The Fed has insisted that a rate hike is not imminent, and that the cost of money will remain at record lows so long as existing slack in the labour market persists. Although the Fed has done its part to de-emphasize the unemployment rate in formulating monetary policy, employment numbers continue to be at the centre of rate hike speculation. A stronger pace of job creation, therefore, could enhance the dollar’s appeal.

In the afternoon session the US dollar index was at 79.52, up 0.06 percent. Central bank officials unanimously agreed to taper bond purchasing by another $10 billion Wednesday, a decision that failed to generate immediate interest in the US dollar.

The British pound continued to advance Thursday, hitting a fresh five-year high against the greenback. The GBPUSD pair was trading at 1.6889 in the afternoon session, up 15 pips. The pair rose to a session high of 1.6912 earlier in the day.

Markit Group will report on UK construction PMI Friday.

Elsewhere in Europe, the EURUSD pair tread water after trading within a narrow range throughout the day. The pair consolidated at 1.3865.

Markit Group will release manufacturing PMI for Germany, Greece, France and Italy on Friday. The European Commission is scheduled to report on Eurozone unemployment. No change to the unemployment rate is expected.

The USDCAD pair edged up slightly, consolidating at 1.0965 versus a previous close of 1.0958. The pair rose to a daily high of 1.0996. The pair has lost more than 0.6 percent this week.

The USDJPY edged higher as Japanese jobless claims rose slightly in March, the Institute of Labour reported today. A strong employment report Friday would help lift this pair back toward the 103 level.

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