Forex Today: US Dollar consolidates weekly gains ahead of PMI data
Here is what you need to know on Friday, November 21:
The US Dollar (USD) stabilizes after outperforming its rivals this week on easing bets of a Federal Reserve (Fed) rate cut in December. The economic calendar will feature preliminary Manufacturing and Services Purchasing Managers' Index (PMI) data for Germany, the Eurozone, the UK and the US on Friday.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.70% | 0.57% | 1.62% | 0.50% | 1.33% | 1.36% | 1.28% | |
| EUR | -0.70% | -0.02% | 1.27% | -0.18% | 0.62% | 0.68% | 0.59% | |
| GBP | -0.57% | 0.02% | 1.03% | -0.16% | 0.64% | 0.70% | 0.62% | |
| JPY | -1.62% | -1.27% | -1.03% | -1.07% | -0.27% | -0.25% | -0.36% | |
| CAD | -0.50% | 0.18% | 0.16% | 1.07% | 0.83% | 0.86% | 0.78% | |
| AUD | -1.33% | -0.62% | -0.64% | 0.27% | -0.83% | 0.07% | -0.01% | |
| NZD | -1.36% | -0.68% | -0.70% | 0.25% | -0.86% | -0.07% | -0.08% | |
| CHF | -1.28% | -0.59% | -0.62% | 0.36% | -0.78% | 0.01% | 0.08% |
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 US Bureau of Labor Statistics (BLS) reported on Thursday that Nonfarm Payrolls (NFP) rose by 119,000 in September. This print followed the 4,000 decrease recorded in August and surpassed the market expectation of 50,000. Other details of the employment report showed that the change in NFP for July was revised down by 7,000, from +79,000 to +72,000, and the change for August was revised down by 26,000, from +22,000 to -4,000. After posting large gains on Wednesday, the USD Index continued to edge higher on Thursday and touched its highest level in two weeks above 100.30 before entering a consolidation phase. At the time of press, the USD Index was trading marginally lower on the day, holding slightly above 100.00.
During the Asian trading hours, the data from Japan showed that Exports increased by 3.6% on a yearly basis in October and Imports rose by 0.7%. Additionally, Jibun Bank Manufacturing PMI edged higher to 48.8 in November from 48.2 in October, while the Services PMI remained unchanged at 53.1. In the meantime, Japanese Prime Minister Sanae Takaichi's cabinet approved a 21.3 trillion yen ($135.40 billion) economic stimulus plan. USD/JPY edges slightly lower in the European morning on Friday but holds above 157.00.
The UK's Office for National Statistics announced early Friday that Retail Sales declined by 1.1% on a monthly basis in October after rising 0.7% in September. After closing virtually unchanged on Thursday, GBP/USD stays relatively quiet and fluctuates below 1.3100 early Friday.
EUR/USD extended its slide on persistent USD strength and closed the fifth consecutive day in negative territory on Thursday. The pair stages a correction toward 1.1550 in the European morning on Friday.
After failing to stabilize above $4,100, Gold struggled to attract buyers on Thursday and ended the day with small losses. Gold stays under bearish pressure early Friday and declines toward $4,000.
AUD/USD lost about 0.6% on Thursday before stabilizing near 0.6450 early Friday. The data from Australia showed that the S&P Global Composite PMI rose to 52.6 in November from 52.1 in October, reflecting an ongoing expansion in the private sector's business activity.
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.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
