US Dollar declines ahead of October’s NFP

The Dollar Index fell for the day to 106.15, a decrease of 0.50%. In line with the current risk-on trend, US government bond yields are also falling while Wall Street indexes are rising.

Market participants are now concentrating on Friday’s Nonfarm Payrolls report for October. Following Wednesday’s decision and Chair Powell’s remarks, dovish bets on the Fed and falling US bond yields caused the dollar to plummet on Thursday, with the DXY index falling to 106.15.

The October jobs report from the US Bureau of Labour Statistics (BLS) will be released on Friday, November 3 at 12:30 GMT. The following are the predictions made by the researchers and economists of nine major banks regarding the employment data that will be released as the release date approaches.

In contrast to the stronger-than-expected 336K increase in September, nonfarm payrolls are expected to rise by 180K in October. The unemployment rate is predicted to remain stable at 3.8%, and average hourly wages are predicted to decrease by 2.5% to 4.0% annually.

Now, all eyes are focused on Friday’s Nonfarm Payrolls (NFP) report from October, which has the potential to influence the USD’s short-term outlook and deepen its losses.

The more sanguine Economists at Commerzbank predict that 230K new jobs were created in October, which is about average for the previous six months. As far as the Fed is concerned, this would likely still be too high.

The Fed and Chair Jerome Powell welcomed the most recent data, which demonstrated that the US economy is still robust but that inflation and the rate of job creation are slowing down.

Jerome Powell also made hints that the bank has tightened considerably and that he will take the tighter financial conditions and the overall effects of monetary policy into account when making decisions going forward.

The Initial Jobless Claims for the week ending October 28 came in higher than anticipated, according to the US Department of Labour. The number of people applying for unemployment benefits was 217,000, which was more than the 210,000 predicted number and up from the previous reading of 212,000.

US Treasury yields are rapidly decreasing elsewhere. The longer-term 5- and 10-year rates declined towards 4.63% and 4.67%, while the 2-year rate dropped to 4.99%, making it more difficult for the US dollar to find buyers.

The CME FedWatch Tool indicates that there is still little chance of a 25 basis point hike in December—roughly 20%—which would put more pressure on the USD.

The Nonfarm Payrolls number can affect the Federal Reserve’s decisions because it measures how well the Fed is achieving its goals of promoting full employment and 2% inflation.

A comparatively high NFP number indicates that more people are working, making more money, and most likely spending more money. On the other hand, a comparatively low Nonfarm Payrolls result could indicate that individuals are having difficulty finding employment.

Generally speaking, the Fed will lower interest rates to jog a stagnant labour market and raise them to counter high inflation brought on by low unemployment.