Forex Today: US Dollar finds support as focus shifts to US consumer sentiment data
Here is what you need to know on Friday, November 7:
The US Dollar (USD) stabilizes in the European morning on Friday after weakening against its major rivals on Thursday. In the second half of the day, labor market data from Canada and the University of Michigan's US Consumer Sentiment Index data for November will be featured in the economic calendar.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.02% | 0.15% | -0.37% | 0.74% | 0.98% | 2.07% | 0.38% | |
| EUR | 0.02% | 0.16% | -0.28% | 0.76% | 0.98% | 2.08% | 0.40% | |
| GBP | -0.15% | -0.16% | -0.60% | 0.60% | 0.82% | 1.92% | 0.23% | |
| JPY | 0.37% | 0.28% | 0.60% | 1.08% | 1.32% | 2.42% | 0.87% | |
| CAD | -0.74% | -0.76% | -0.60% | -1.08% | 0.17% | 1.29% | -0.36% | |
| AUD | -0.98% | -0.98% | -0.82% | -1.32% | -0.17% | 1.09% | -0.58% | |
| NZD | -2.07% | -2.08% | -1.92% | -2.42% | -1.29% | -1.09% | -1.65% | |
| CHF | -0.38% | -0.40% | -0.23% | -0.87% | 0.36% | 0.58% | 1.65% |
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 pressure in the second half of the day on Thursday as the data published by Challenger, Gray & Christmas showed that US-based employers cut more than 150,000 jobs in October, the biggest reduction for the month in over two decades. The details of the report revealed that tech firms, retailers and the services sector led the job cuts in this period. Wall Street's main indexes suffered large losses and the USD Index lost about 0.5% on a daily basis. Early Friday, the USD Index holds steady at around 99.80.
The Bank of England (BoE) decided to leave the policy rate unchanged at 4% after the November policy meeting. This decision came in line with the market expectation but the policy statement showed that four members of the Monetary Policy Committee (MPS) voted in favor of a 25 basis points (bps) rate cut. Although the initial market reaction to the BoE decision made it difficult for Pound Sterling to find demand, Governor Andrew Bailey's cautious comments on further policy easing helped the currency reverse its direction. "We need to see the downward path of inflation become more established before we cut rates again," Bailey told in the post-meeting press conference, and added that they expect the pass-through of non-wage labour costs' rise to limit the decline in services price inflation. GBP/USD corrects lower early Friday but holds above 1.3100 after rising nearly 0.7% on Thursday.
Following Wednesday's modest recovery, EUR/USD benefited from the broad-based USD weakness and rose about 0.5% on Thursday. The pair stays relatively quiet and trades in a narrow channel below 1.1550.
The data from China showed early Friday that Exports expanded by 1.1% on a yearly basis in October, while Imports increased by 1%. Both of these prints came in below analysts' estimates. AUD/USD edges higher toward 0.6500 after closing deep in negative territory on Thursday.
Gold holds above $4,000 after posting marginal gains on Thursday.
USD/JPY gains traction and trades in positive territory near 153.50 after losing nearly 0.7% on Thursday.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
(This story was corrected on November 7 at 08:34 GMT to note that Challenger Job Cuts data was published on Thursday, not Tuesday.)
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.
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