The US dollar has had a busy albeit truncated week, with the Labour Day holiday keeping US markets closed on Monday. Tuesday started out with a positive outlook, as speculation continued to mount that we could see an interest rate hike in the near term given the recent strong data from the States. This was supported by the first major US data of the week, as the Manufacturing Purchasing Managers’ Index (PMI) from the Institute for Supply Management came out better than expected. The figure rose unexpectedly, to its highest level since March 2011, seeing the US dollar gain against the majority of its most traded partners.
A slight reversal came mid-week, as wider geopolitical events exerted an influence. The safe-haven dollar weakened as a ceasefire in eastern Ukraine moved closer, supported by discouraging data in the form of lower-than-anticipated factory orders.
The US dollar surged yesterday following the shock announcement from the ECB to lower all three of their main interest rates. This move was accentuated following data from the US showing that trade balance showed an unexpected narrowing to its lowest level in six months and services PMI data beat market estimates.
Today keeps up the intensity, as official non-farm employment change and unemployment rate figures are due. Given the importance of the labour market, these data sets could create further opportunity for movement in dollar markets ahead of the weekend.