Forex Today: US Dollar gathers recovery momentum ahead of critical employment data
Here is what you need to know on Friday, November 6:
The US Dollar (USD) gathers strength against its rivals early Friday, with the USD Index rising toward 102.00 after closing marginally higher on Thursday. The European economic calendar will feature Retail Sales data for September. Later in the day, October employment report from the US, which will feature Nonfarm Payrolls, wage inflation and Unemployment Rate figures, could ramp up market volatility.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.36% | 0.34% | 0.06% | 0.34% | 0.82% | 0.69% | 0.13% | |
| EUR | -0.36% | -0.03% | -0.30% | -0.02% | 0.45% | 0.32% | -0.23% | |
| GBP | -0.34% | 0.03% | -0.25% | 0.01% | 0.48% | 0.35% | -0.21% | |
| JPY | -0.06% | 0.30% | 0.25% | 0.30% | 0.77% | 0.63% | 0.07% | |
| CAD | -0.34% | 0.02% | -0.01% | -0.30% | 0.47% | 0.33% | -0.22% | |
| AUD | -0.82% | -0.45% | -0.48% | -0.77% | -0.47% | -0.13% | -0.69% | |
| NZD | -0.69% | -0.32% | -0.35% | -0.63% | -0.33% | 0.13% | -0.54% | |
| CHF | -0.13% | 0.23% | 0.21% | -0.07% | 0.22% | 0.69% | 0.54% |
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).
The USD came under heavy selling pressure on Wednesday as crude Oil prices plunged following the defeat of Republicans at the US midterm elections. On Thursday, safe-haven flows returned to markets and helped the USD stay resilient against its peers. The Nasdaq Composite lost more than 6% on the day, while the Dow Jones Industrial Average and the S&P 500 indexes fell 3.4% and 4.4%, respectively. Early Friday, US stock index futures trade mixed, while Oil prices edge slightly higher after rebounding sharply on Thursday.
While speaking to reporters at the White House, US President Donald Trump said that Iran is not doing anything pertaining to its nuclear program without the approval of the US. "Now we will make a decision [on Iran]. Do we want to go further… and certify it… so that it will never happen again. I would rather not destroy the rest of the country if possible, but maybe I will have to. You will know soon enough,” he added.
Markets expect the Unemployment Rate in the US to remain unchanged at 4.2% in October and see Nonfarm Payrolls rising by 65K following the 29K increase recorded in September.
US payrolls keep Fed focus on inflation in the spotlight
Analysts at Commerzbank warn that “anyone hoping for a quiet trading session on Friday after this eventful week is likely to be disappointed,” with the latest US payroll figures due and set to dominate the agenda. They describe the release as “one of the most important pieces of economic data” because it “usually provide[s] an indication of the Fed’s future monetary policy.”
According to the bank, “the key question is what this means for the Fed’s future monetary policy.” In their view, “if the labour market remains as robust as it has been so far this year, policymakers are likely to maintain their focus on the inflation figures due next week,” suggesting that a still-firm jobs backdrop would keep upcoming price data at the centre of the Fed’s deliberations.
Gold climbed to a fresh two-week high near $4,150 on Thursday but erased a large portion of its gains before closing below $4,100. The precious metal stays on the back foot early Friday and trades below $4,050, losing more than 1% on a daily basis.
The Bank of England (BoE) announced that it raised its interest rate by 25 basis points (bps) to 4% after the November policy meeting. During the press conference, BoE Governor Andrew Bailey said that unless there is progress towards resolving the conflict in the Middle east, a further increase in the bank rate may be warranted. GBP/USD stays under bearish pressure on Friday after posting marginal losses on Thursday and trades near 1.3400, losing about 0.35% on the day.
After snapping a three-day winning streak on Thursday, EUR/USD extends its slide and trades below 1.1200 in the European morning on Friday.
USD/JPY holds its ground and trades in a narrow channel slightly below 158.00 after losing about 0.5% on Thursday.
USD/CAD preserves its bullish momentum after gaining about 0.3% on Thursday and trades above 1.4050 in the European morning. Statistics Canada will publish October labor market data later in the day. Investors expect the Unemployment Rate to hold steady at 6.5% with the Net Change in Employment arriving at 13.6K following the disappointing -68.3K reported in September.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.