The US dollar traded slightly higher in early European trade Friday in the market. It happened with market participants tending to be cautious ahead of the release of US jobs data that could explain the strength of the country's economic recovery.
The Dollar Index, which tracks the greenback against six other currencies, was up 0.1% at 92,838. That means the commodity is on track for its best week in more than two months. The dollar has managed to stop its recent decline.
However, the overall sentiment remains one of the downsides as the Federal Reserve has seriously stated that it intends to keep interest rates low for a very long time. In addition, there are still concerns about the strength of US economic growth.
Dollar's Downtrend is considered to be Still on Place
If real interest rates are one of the best gauges of monetary policy setting, then US monetary conditions are now the loosest since 2012. The downward trend in the dollar has just begun. The crippling fiscal policy becomes one of the biggest reasons.
The change in monetary policy strategy from the Federal Reserve is also making the case for the dollar's downward trend to continue into the next year. The bank has raised its final 2021 EUR/USD forecast to 1.25 from 1.10 previously.
One measure of the strength of the US recovery is the labor market, and data due later Friday. It is estimated that the Americans will show US non-farm wages growing by 1.4 million in August. It will be slower than the 1.763 million jobs created in the previous month.
Employment is Considered Still Low
Employment will still be around 11.5 million below pre-pandemic levels. It is for sure lower than the normal condition. On the other hand, slower growth could add to pressure on US policymakers to restart stalled negotiations for another fiscal package.
German industrial goods orders rose a smaller-than-expected 2.8% in July. GBP/USD fell 0.1% to 1.3272, retreating from its highest level in almost a year. It was occurred due to a lack of progress in trade negotiations between the UK and the European Union.
Senior UK officials see only a 30% -40% chance that there will be a Brexit trade agreement with the European Union due to deadlock over state aid rules and fisheries rights. However, investors will monitor every possibility in the market.
Besides that, the data showed that commodity-linked currencies suffered the most amid falling equities. AUD/USD and USD/CAD are trading at weekly lows. Furthermore, the commodity such as gold is also reported down a little because of some reasons.
The Greenback Remains Strong in the First Half
The greenback remained strong throughout the first half, despite receding dollar demand in recent trading sessions. In general, this situation is driving up the US employment-related data; the greenback remains to end the day mixed. It can be good or bad news.
After the S&P and Nasdaq hit record highs on Wednesday, US indexes fell. That was led by sharp falls in the tech sector which was surprised everyone and for sure investors. The Nasdaq Composite lost more than 5% which was its worst performance in months.
The US Centers for Disease Control and Prevention shocked the media by telling states to prepare a coronavirus vaccine ready for distribution in early November. Speculation is rising about being a political movement ahead of the presidential election. Health experts warned against distributing vaccines early.
The EUR/USD pair should recover some ground by the end of the day, surging towards 1.1870. The GBP/USD pair lost the 1.3300 thresholds. As the never-ending Brexit drama continued, with no signs of progress in trade talks and time is running.
