Yesterday saw a reversal of Monday’s positivity for the US dollar as it fell against the majority of its most traded partners throughout the day. These losses came on the back of a worse-than-expected trade balance, which showed the deficit to have widened unexpectedly. As a result, the latest hopes of an interest rate rise were calmed as it injected a little more negativity over the economic recovery. The only area that saw the dollar gain was against oil-exporting nations including the Canadian dollar and Norwegian krone, as the price of crude oil fell.
But this reversed overnight with the US dollar strengthening as the Republicans made significant electoral gains and took control of both the Senate and Congress thereby making the Presidents life very difficult.
Today sees a few key events that could affect the dollar, including data releases alongside words from a Federal Open Market Committee (FOMC) member. Firstly we will hear the independent non-farm employment change figure from the ADP. This is a precursor to Friday’s more influential official figure, and as such could provide a good indication. The other major data point will be the non-manufacturing Purchasing Manager’s Index (PMI), which could help support the dollar if it follows the positive manufacturing version earlier in the week. Between these there is a speech from a member of the Federal Reserve; investors are sure to scrutinise this closely as they look for any support for interest rate rises. All of these combined could see some activity in dollar markets as we move in to a busy end of week.