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The Dollar was thrown an unexpected lifeline mid-week, as solid US data and a slightly more hawkish Federal Reserve dampened expectations of a rate cut in the near-term.
Investors were forced to re-evaluate the Federal Reserve’s monetary policy path for 2019 after Jerome Powell stated that lower inflation was “transitory”. With the recent string of positive data also easing concerns over the health of the US economy and boosting the Dollar’s safe-haven status, bulls are likely to remain in the driver’s seat in the near-term.
Today’s main risk event for the Dollar will be the all-important jobs report which should offer fresh insight into the health of the US labour force. Markets expect the US economy to have added 180k jobs in April, with wage growth projected to rise 0.3% month-on-month while the unemployment rate is anticipated to remain unchanged at 3.8%. While every element of the jobs report is important, there will be a special focus on wage growth which could shape interest rate expectations. Any signs of wage growth cooling could rekindle speculation over the Fed cutting interest rates – something that will punish the Dollar. Looking at the technical picture, the Dollar Index (DXY) is trading marginally below 98.00 as of writing. A weekly close above this level may inject bulls with enough inspiration to attack 98.33.
Gold remains stuck in its bearish channel after Fed Chair Jerome Powell pushed back against calls for a US interest rate cut.
