Forex Today: US Dollar struggles to find demand ahead of key jobs data

Eren Sengezer FXStreet

Here is what you need to know on Friday, June 7:

The US Dollar (USD) is having a tough time staying resilient against its rivals on the last trading day of the week, with the USD Index staying near the multi-week low it set at around 104.00 earlier in the week. The US Bureau of Labor Statistics will release the jobs report for May later in the day, which will feature Nonfarm Payrolls, Unemployment Rate and wage inflation figures.

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 weakest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.45%	-0.45%	-1.24%	0.28%	-0.37%	-1.00%	-1.62%
EUR	0.45%		0.02%	-0.80%	0.73%	-0.06%	-0.56%	-1.20%
GBP	0.45%	-0.02%		-0.76%	0.69%	-0.01%	-0.64%	-1.22%
JPY	1.24%	0.80%	0.76%		1.51%	0.94%	0.40%	-0.21%
CAD	-0.28%	-0.73%	-0.69%	-1.51%		-0.67%	-1.27%	-1.91%
AUD	0.37%	0.06%	0.01%	-0.94%	0.67%		-0.51%	-1.17%
NZD	1.00%	0.56%	0.64%	-0.40%	1.27%	0.51%		-0.68%
CHF	1.62%	1.20%	1.22%	0.21%	1.91%	1.17%	0.68%

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 Unemployment Rate in the US is forecast to hold steady at 3.9% in May, while Nonfarm Payrolls are seen rising 185,000 following the weaker-than-forecast 175,000 increase recorded in April. The annual wage inflation, as measured by the change in the Average Hourly Earnings, is expected to remain unchanged at 3.9%. Ahead of the labor market data, the benchmark 10-year US Treasury bond yield stays flat at around 4.3% and US stock index futures trade modestly higher on the day.

US Nonfarm Payrolls growth set to stabilize in May as signs of cooling labor market mount.

The European Central Bank (ECB) announced on Thursday that it lowered key rates by 25 basis points following the June policy meeting. This decision came in line with the market expectation. In the post-meeting press conference, ECB President Christine Lagarde refrained from confirming further easing in the near term, reiterating the data-dependent approach to policy moving forward. EUR/USD's reaction to the ECB event was relatively muted but the pair managed to edge higher to the 1.0900 area. During the European trading hours, Eurostat will publish revisions to first-quarter Employment Change and Gross Domestic Product data. Meanwhile, Germany's Destatis reported earlier in the day that Industrial Production declined 0.1% on a monthly basis in April.

In the Asian session, the data from China showed that Exports rose 7.6% on a yearly basis in May, surpassing the market expectation for an increase of 6%. In the same period, Imports increased 1.8%. After closing in positive territory on Thursday, AUD/USD stretched higher early Friday and was last seen trading a few pips above 0.6670.

Australian Dollar holds gains after China's Trade Surplus, awaits NFP.

GBP/USD registered small gains on Thursday but failed to gather bullish momentum. The pair trades in a narrow channel at around 1.2800 early Friday.

USD/JPY retreated below 156.00 on Thursday and continued to stretch lower. At the time of press, the pair was trading in negative territory below 155.50.

Japanese Yen consolidates, while Japan Suzuki mentions no fund limit for FX intervention.

Gold extended its weekly uptrend on Thursday and gained nearly 1% on the day. XAU/USD clings to small daily gains early Friday at around $2,380.

Gold price trims gains ahead of US NFP data.

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders?

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

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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