Dollar Slides Further on Woes over Labor Market Recovery

Dollar

The dollar index, which measures the greenback against a basket of major currencies, extended declines, falling to 92.52, the lowest since May 2018 amid growing woes over the US labor market recovery. Despite the strong ISM non-manufacturing reading, which came out at 58.1 beating expectations, the employment component was weaker at 42.1 versus 43.1 previously. Also, the ADP Nonfarm Employment change recorded 167 thousand versus estimates of 1.5 million. Market participants are awaiting further job data among them: jobless claims, nonfarm payrolls, and unemployment rate. If the labor market failed to recover rapidly, it could force the Federal Reserve to push for more monetary stimulus.

Pound

The British pound was firmer against rivals post the monetary policy decision of the Bank of England. The monetary policy committee kept policy setting unchanged where interest rates remained at their low level of 0.10% and asset purchases at 745 billion pounds. The committee raised the GDP forecast for 2020 to -9.5% from -14% previously but warned of slower recovery. The Bank will continue to monitor the developments closely and remain ready to act further if needed to ensure a rapid and healthy recovery. The GBPUSD rose to $1.3183, the highest since early March 2013.

Equities

Major US stock index futures extended their upside rally amid optimism over the coming relief package. In addition to the productive talks held over the next relief bill, President Trump declared that he supports a plan to provide additional aid to the airline sector. The Dow Jones Industrial Average futures rose to a two-month high of 27191, the S&P500 futures rallied to 3328, and Nasdaq futures hit a fresh record high of 11144.

Metals

Precious metals prices added to their prior gains supported by growing stimulus bets and dropping US Treasury yields. The price of a gold ounce soared to another record high of $2055, the price of a silver ounce rallied to $27.84, and palladium futures inched higher to $2245.

Oil

Oil prices drifted lower, failing to hold gains after trading at their highest levels since March. The continuous rapid spread of the coronavirus in the world is weighing on the prospects of a fast economic recovery and lowering expectations of a healthy recovery in oil-demand levels. The West Texas Intermediate crude September delivery fell to $41.68, and Brent blend October delivery dropped to $44.88.

Major Economic Events

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