During the Asian session on Friday, the US dollar was almost unchanged against the euro and other currencies. Investors took a wait ahead of the release of the August labor market data in the US, which will be published today at 15:30 (GMT + 3).
The report could clarify the short-term prospects for the monetary policy of the Federal Reserve System.
The indicator of job growth in the US (Non-Farm PayRolls) in August usually falls under the influence of seasonal factors, and for the past five consecutive years, it does not justify the expectations of the market. The Non-Farm PayRolls growth rate is expected to be 180 000 new jobs. However, some economists expect an increase in US jobs outside agriculture in August at 150,000.
If the deviation exceeds 20%, the US dollar will fall sharply in the foreign exchange market, because of the expectations of interest rate rise in the US in the coming months, especially in September, well be significantly weakened. The decision on raising interest rates in the US will be made at the next Fed meeting on 20-21 September.
The US macroeconomic indicators came out ambiguous yesterday. Many of them turned out to be weaker than predicted values.
The index of business activity in the manufacturing sector in August was 52 points (the forecast of 52.1 points), the indicator of economic conditions in the ISM manufacturing sector in August was 49.4 points (the forecast growth of up to 52 points), the ISM gradual acceleration of inflation index in August also appeared below expectations (53 vs. 55, respectively).
The WSJ dollar index, which reflects the value of the US currency against 16 other currencies, was down 0.3%, to 86.75. The US dollar decreased in EUR/USD pair, as well as against the pound, the New Zealand, and Australian dollars.
At these rates the Fed cannot go the length of an interest rate rise in September. Therefore, from the labor market report will depend a lot in the decision on US interest rates. Characteristically, the Cleveland Fed President Loretta Mester said on Thursday that a gradual increase in rates is necessary. However, she did not specified the time-frame of the rise.
As for the euro, the next week (8 September) a regular meeting of the ECB will be held. In recent years, the weak macro-economic indicators for the euro area are located. The ECB may once again put on the agenda the question of the possibility of a new easing of monetary policy, and this will exert downward pressure on the euro and EUR/USD pair.