In the ever-evolving landscape of global forex markets, the US Dollar maintains its robust position, with traders closely observing its performance as the week concludes. As we look ahead to Friday, September 8, market participants eagerly anticipate key economic releases from Japan and Canada, amidst a backdrop of mixed sentiments on Wall Street and a fluctuating US Treasury yield.
Wall Street closed with a mixed performance on Thursday, with the Dow Jones gaining 0.17% while the Nasdaq experienced a modest decline of 0.89%. Caution continues to linger among investors as they weigh various factors influencing market direction. US Treasury yields initially surged following the release of US economic data, only to retreat later, eventually settling at approximately 4.25% for the 10-year yield.
Thursday’s economic data from the United States unveiled a positive picture, with Initial Jobless Claims dropping to 216,000 and Continuing Claims falling to 1.679 million, surpassing market expectations. These impressive figures propelled the US Dollar Index to reach a peak of 105.15, marking its highest level since March. Although it retraced slightly to 105.05, these economic indicators bolster the narrative of “higher for longer” interest rates, providing unwavering support to the US Dollar.
EUR/USD closed with its lowest daily value in three months, hovering just below the 1.0700 mark. The Euro faces vulnerability with a clear downward trajectory, showing no immediate signs of stabilization. The forthcoming release of Germany’s Consumer Price Index is expected with little surprise, while the European Central Bank’s (ECB) upcoming monetary policy meeting looms, shrouded in uncertainty regarding potential actions on interest rates.
Analysts at Danske Bank weigh in on the ECB meeting, projecting a 25-basis point hike in the deposit rate to 4.00%, citing a worsening economic outlook and a more dovish market sentiment. They emphasize the ECB’s focus on its inflation mandate rather than fostering economic activity.
USD/JPY, after reaching multi-month highs just below 148.00, experienced a modest pullback, partly attributed to the reversal in US yields. The spotlight now turns to Japan’s release of Q2 GDP growth data on Friday.
The British Pound, against the backdrop of the US Dollar, recorded its fifth daily decline out of the last six days. GBP/USD touched a three-month low at 1.2445, closely approaching the 200-day Simple Moving Average (1.2425), before rebounding to 1.2470.
Despite some signs of stabilization in China’s trade data, the Australian Dollar continues to grapple with pressure from fluctuating commodity prices and the strength of the US Dollar. AUD/USD remains confined to a range between 0.6360 and 0.6400, hovering near monthly lows and exhibiting a downward bias.
The Canadian Dollar displayed weaker performance during the Americas session, despite encouraging Building Permits and Ivey PMI data. Following the Bank of Canada’s decision to maintain interest rates at 5%, Governor Macklem explained the decision, highlighting the absence of significant downward momentum in underlying inflation. USD/CAD climbed to its highest level since March and now eyes the 1.3700 area. Canada is set to release the August employment report on Friday.
TD Securities offered insights on Canadian jobs data, projecting the addition of 20,000 jobs in August, slightly below the 6-month trend and insufficient to keep pace with population growth. A partial rebound in the construction sector is expected to contribute to the headline print, with the unemployment rate likely to remain stable at 5.5%. Softer wage growth may add a dovish tone to the report, even if job figures slightly exceed consensus expectations.
