The dollar’s recent rally took a pause overnight as the greenback retreated against the majority of its rivals. Market participants seem to be hedging bets ahead of tomorrow’s non-farm payroll data. Yesterday’s ADP private payroll reading showed healthy signs for the labor market. Economists expect tomorrow’s NFP to show the US economy added 180K jobs in November, up from 161K jobs added in the month prior.
The Federal Reserve is widely expected to raise interest rates later this month, but attention will then shift into 2017. Questions about the economy’s overall strength and inflation pressures created by some of Donald Trump’s proposals are likely to dominate interest rate speculation going into the New Year.
This morning’s economic docket was unable to change the greenback’s fortune. Weekly jobless claims came in higher than expected and touched the highest level since June. Claims increased by 17K to 268K. However, the four week average was mostly unchanged. Jobless claims this year have averaged near the lowest levels in four decades.
The Euro recovered slightly overnight playing its role as safe-haven to tumbling equity markets across the ancient continent. Investors are concerned that Italy’s referendum will not pass; risking the loss of a key pro-EU leader in Italian PM Matteo Renzi whose political existence is dependent on the “Yes” succeeding.
As discussed in the last few days, Brexit rhetoric from both sides of the equation has been less than friendly as both sides continue to accuse the one another of lack of cooperation. Britain’s incessant interest to remain a player in the single free market while reducing people’s mobility has struck the wrong chord with many EU lawmakers. The shared currency is likely to remain fragile and volatile in the days ahead.
The British pound was the biggest winner overnight, gaining a full percent against the U.S. dollar. The sterling traded to its strongest level since November 11th after Brexit Secretary David Davis said the U.K. would consider making contributions to the EU in order to secure the best possible access to the single market. Most EU officials have taken a hard line regarding access to the single market but recent commentary may show a thawing. Dutch Finance Minister Jeroen Dijssloem was quoted as saying that Britain might be able to participate in the internal market, albeit at a cost.