Dollar Races Higher Ahead of Jobs Data

USD

The dollar index, which measures the greenback performance against a basket of major currencies, extended its upside rally, hitting 92.60, its highest level since early April ahead of the US June jobs report. The ADP Non-farm Employment change came out on Wednesday with an upbeat reading of 692. The consensus for the Nonfarm payrolls is around 700 thousand. On the other hand, the ISM Manufacturing PMI ticked lower to 60.6 from 61.2, but the price component soared to 92.1, raising inflation woes. Investors will look carefully into the jobs report, where a strong job creation reading, and significant wage growth, could increase the chances of monetary policy tightening soon. The USDJPY rose to 111.65, the highest since March 2020, the EURUSD dipped to $1.1837, and the AUDUSD plunged to $0.7460.

Equities

Major US stock index futures had a mixed performance, with the Dow Jones rising on reflation trade, while the Nasdaq eased from the highs. The ISM Manufacturing price component rose to 92.1, its highest reading since 1979. Manufacturers were reporting the impact of distressed supply chains, which could continue for a longer period. Rising inflation could raise yields at a faster pace, which would weigh on leveraged tech companies while being in favor of the financial sector. The Dow Jones Industrial Average future rose to 34562, the S&P500 hit another all-time high of 4313, while Nasdaq futures eased to 14515.

Metals

Precious metals prices inched higher despite the dollar being firmer than other currencies. The inflation woes are supporting again the capital flow to metals as an inflationary hedge, while US long-term yields are still stressed. The price of a gold ounce rose to $1782, the price of a silver ounce held steady near $26, while palladium eased to $2763.

Oil

Oil prices edged higher with WTI hitting a fresh 2018 high as OPEC+ seemed more cautious with supply additions. Saudi Arabia and Russia proposed adding 400,000 barrels each month from August to December. Therefore, a total of 2 million barrels would be relaxed going during the second half of 2021. The UAE, Iraq, and Kazakhstan blocked the deal and asked for new production baselines. The negotiations will continue today in Vienna. The West Texas Intermediate crude August contract rose to $76.19, and the Brent blend September contract rallied to $76.72.

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