Dollar Holds Gains Ahead of US Payrolls Amid Euro Weakness
The pound strengthened slightly on Friday, while the euro firmed up against its American counterpart. The dollar maintained its strongest levels of the year, ahead of the U.S. September payrolls announcement.
Pricing for a Federal Reserve rate hike in October decreased to 28% from 70% just a week ago, following dovish comments from Fed Vice Chair Philip Jefferson and President John Williams. Short-term U.S. rates dropped significantly, with markets now assuming a December rate hike instead of an October one.
The September non-farm payrolls are expected to show a gain of 85,000-90,000 jobs, while unemployment is forecasted at 4.1% and earnings up 3.1% year-on-year. ING's Chris Turner stated that despite low growth in the US labor force, a downside disappointment in the headline number will not significantly impact U.S. rates or the dollar.
The euro, on the other hand, is under pressure due to its vulnerability as French debt continues to sell off. ING sees EUR/USD biased towards 1.1100/1120, with a possibility of reaching 1.10 in the near term if the sell-off extends.