US Dollar May Rise If Fed Comments Point To Tighter Job Market

A relatively quiet economic data docket in European trading hours puts Fed-speak in the spotlight. Comments from Charles Evans and Neel Kashkari, Presidents of the US central bank’s Chicago and Minneapolis branches, are due to cross the wires. Traders will be keen to hear the two officials’ take on the latest jobs report in the context of probability for an interest rate hike at the June FOMC meeting.

April’s labor-market figures disappointed on payrolls growth, revealing the economy added 160k jobs versus the 200k increase expected by economists. Wage growth outperformed however, with the growth rate in average hourly earnings unexpectedly hitting a three-month high at 2.5 percent year-on-year.

Taken together, this may hit at a tightening jobs market. Slowing payroll gains coupled with rising wages might reflect ebbing labor-market slack and approaching “full employment”, a state wherein further decline in joblessness boosts inflation.

This seems to be exactly what the Fed is looking for to ramp up tightening. Rhetoric suggesting as much may boost the US Dollar but weigh on risk appetite, with the Australian, Canadian and New Zealand Dollars tracking share prices downward.

The Japanese Yen declined as Asian stocks advanced in overnight trade, sapping demand for the anti-risk currency. The Aussie and Kiwi retraced upward early in the session having underperformed in Friday’s session, but the moves struggled to maintain momentum into the opening bell in Europe.

Asia Session