Dollar Rebounds Ahead of Private Jobs and Fed Statement

Fed Expected to Hold Rates Awaiting December meeting

The US dollar is higher against most major pairs on Tuesday ahead of the release of private payrolls data and the statement by the Federal Open Market Committee (FOMC). With employment data due for some good news after the hurricane season, a Fed Chair appointment now imminent before the end of the week and progress in the tax reform front the USD has been bid.

The ADP non-farm employment report will be released on Wednesday, November 1 at 8:15 am EDT. The number of jobs gained in the private sector is forecasted to top 200,000 after the negative effects that impacted last month’s report have subsided.

The U.S. Federal Reserve will ends its two day Federal Open Market Committee (FOMC) meeting on Wednesday and release the statement at 2:00 pm. The Fed is not expected to make any changes to the benchmark interest rate that currently sits in the 100–125 basis points range. The CME FedWatch tools shows a 0.5 percent of the rate going down. The December meeting in stark contrast is at a 99.5 percent of it being higher than the current range.

The EUR/USD is flat on Tuesday. The single currency is trading at 1.1653 with the EUR appreciating 0.40 in the first two trading sessions of the week. The balance in the currency pair could break on the USD side on the anticipation of improved private jobs data to be released on Wednesday and ahead of the U.S. non farm payrolls (NFP) report due Friday. The FOMC statement will offer little clues going forward but investors will be looking closely at the language used by the central bank for more hints on the December rate setting meeting.

The Trump choice for the Fed Chair position is now down to Jerome Powell at the Federal Reserve and John Taylor, an economist at Stanford University. Given the opportunity the Trump administration has to reshape the Fed they both could end up in leadership positions as the Vice Chair role is also vacant. Of the two Taylor is thought to be the more hawkish as Powell is part of the current central bank staff that has hiked rates twice this year and on its way for a third, but Powell is certainly not a dove.

The GBP/USD rose 0.57 percent on Tuesday. The currency pair is trading at 1.3283 due to improving odds of a softer Brexit. The pound has also been appreciating ahead of Thursday’s Bank of England (BoE) monetary policy meeting. The UK central bank is thought to have a rate hike ready after a rise in inflation and promising economic recovery. The UK interest rate would rise to 0.50 percent the same level it was before the Brexit referendum.

usdcad Canadian dollar graph, October 31, 2017

The USD/CAD gained 0.46 percent on Tuesday. The currency pair is trading at 1.2892 after a disappointing contraction of Canadian gross domestic product (GDP) of 0.1 percent in August. The Canadian economy is facing a slowdown after an impressive first half. The July GDP reading was flat, and with a small forecasted gain of 0.1 that never materialized investors sold the loonie against the greenback.

The Bank of Canada (BoC) held rates unchanged last week at 1.00 percent. The central bank had already hiked twice in 2017. BoC Governor Stephen Poloz spoke in Ottawa today in front of the Senate Committee on Banking, Trade and Commerce. The policy maker outlined the crucial spot in the economy cycle the Canadian economy is facing. Poloz used the word “caution” when talking about future adjustment to the policy rate which has been read as the two rate hikes will be it for 2017.

Market events to watch this week:

Wednesday, November 1
5:30 am GBP Manufacturing PMI
8:15 am USD ADP Non-Farm Employment Change
10:00 am USD ISM Manufacturing PMI
10:30 am USD Crude Oil Inventories
2:00 pm USD FOMC Statement
2:00 pm USD Federal Funds Rate
8:30 pm AUD Trade Balance
Thursday, November 2
5:30 am GBP Construction PMI
8:00 am GBP BOE Inflation Report
8:00 am GBP MPC Official Bank Rate Votes
8:00 am GBP Monetary Policy Summary
8:00 am GBP Official Bank Rate
8:30 am GBP BOE Gov Carney Speaks
8:30 am USD Unemployment Claims
8:30pm AUD Retail Sales m/m
Friday, November 3
5:30 am GBP Services PMI
8:30 am CAD Employment Change
8:30 am CAD Trade Balance
8:30 am CAD Unemployment Rate
8:30 am USD Average Hourly Earnings m/m
8:30 am USD Non-Farm Employment Change
8:30 am USD Unemployment Rate
10:00 am USD ISM Non-Manufacturing PMI

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza