Dollar bulls took their chance yesterday following the release of a report that showed a marked rise in private-sector jobs, giving the greenback a lift against its major rivals. Yesterday, the U.S. currency gained 1% against the EUR, 0.9% versus the JPY and 1.6% against the GBP.
The USD strengthened yesterday after reports showed that U.S. job growth and factory orders quickened, both of which are reducing concerns that the world’s largest economy will head into a recession. The Labor Department said worker productivity rose the most since 2003, while labor costs posted the biggest drop in 4 years. A report from ADP Employer Services showed companies last month added 189,000 jobs, more than triple the average forecast, prompting economists to raise estimates for the government’s payroll report scheduled for release tomorrow. The surprise jump in the ADP Nonfarm Employment report suggests that we could see a better-than-forecast reading of Friday’s Nonfarm Payrolls number, prompting the market to trim back chances of a 50 basis points interest rate cut by the Federal Reserve next week.
Futures contracts show that the odds of a 0.5% point cut by the Fed are currently standing at 42%, down from 48% yesterday. Futures are pricing in a 58% chance of a 0.25 point cut to 4.25%.
Part of the reason for yesterday’s stronger dollar is also the hope that Treasury Secretary Paulson will announce an Interest Rate freeze on subprime mortgages today, thus saving many homeowners from foreclosure. If this manages to work, we could have some respite for the US economy.
As for today, there is only an Unemployment Claims figure expected from the U.S. market. The expectations are currently standing at 335K, 17K down from the previous month’s one.
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