020 7898 0500Weaker average earnings figures stole the show this time last month and sent the dollar lower despite a bumper non-farm payrolls release in excess of 300K jobs added in February. Don’t forget the trigger for the February global stock market sell-off: the US labour market reports showed the strongest annual wage growth since 2009, raising speculation of further rate hikes from the Fed. The dollar rose on this news.
The dollar continues to gain against the Japanese Yen as trade tensions with China appear to be easing. Strong numbers from the US today could help the dollar continue its upward trajectory, back towards 108-109, this against a backdrop of rising inflation in Japan and a central bank that could raise rates within a year. Against sterling, the dollar was bought on Thursday afternoon taking the cash price below a key support for the pound. Just about holding above the 30-day moving average, the pound looks vulnerable at this level. The market is extremely short the dollar (speculative trades selling the dollar), in fact the net speculative positions for the dollar against other G10 currencies, as reported by the CFTC, is at the highest level since Q3 2011. Why is this important? Strong employment and earnings figures coupled with positive news on US/China could lead to squaring of short positions, sending the dollar higher (and the pound lower).
