US Dollar Index edged lower

On Thursday, the US Dollar Index edged lower as the upbeat market mood allowed investors to turn their attention to high-yield assets, such as stocks and commodity-linked currencies. The shared currency, however, remained at the bottom of the list.

Major European equity indexes closed the day decisively higher, Wall Street’s main indexes rose for the third straight day, and the benchmark 10-year US Treasury bond yield climbed above 1.6% for the first time since early June.

ECB minutes spark concerns over eurozone inflation forecasts

Meanwhile, the European Central Bank’s September Monetary Policy Meeting Accounts showed that policymakers didn’t assess the near-term increase in inflation as a factor that could force them to tighten the policy. Moreover, the publication revealed no additional details regarding the upcoming reduction in the pace of Pandemic Emergency Purchase Program (PEPP) purchases and failed to present a euro-buying opportunity.

US jobs growth stronger-than-expected

On Friday, the US Bureau of Labor Statistics’ September jobs report will be watched closely by market participants, who will be looking for the final piece of the taper puzzle.

A stronger-than-expected increase in Nonfarm Payrolls is likely to emphasise the convergence in the ECB’s and the Fed’s policy outlook and allow the bearish momentum to gather strength. On the flip side, one more disappointing NFP print following August’s dismal increase of 235,000 could cap the dollar’s gains.

Nevertheless, Fed Chair Jerome Powell clarified that a robust jobs report is not needed to start tapering asset purchases and the market reaction to a negative reading could remain short-lived. The number to watch for on Friday’s U.S. payrolls report is 200,000. Anything below that would prompt investors to question the health of the economy and send Treasury yields lower in the near term, according to all eight strategists surveyed by Bloomberg. Such a scenario would boost bets for a delay or a slower pace of Federal Reserve tapering. Yet, the figure is less than half of the median of economists’ estimates at 500,000.

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