FOREX-euro, pound set for weekly gain as traders bet Fed on rate hike

(Prices updated at 0910 GMT)

By Ankur Banerjee and Alun John

SINGAPORE/LONDON, Nov 3 (Reuters) – The euro and pound headed for weekly gains against the dollar on Friday as a U.S.-led rise in global bonds sent yields lower along with the greenback, bringing relief to the embattled. Japanese yen.

However, the always key US non-farm payrolls data due at 1230 GMT – the most important data point in a busy week – could change that story entirely.

The euro was last up 0.1% at $1.0632, heading for a weekly gain of 0.63% thanks to early week gains. Sterling was similarly flat at $1.2193 on the day, setting a weekly gain of 0.61%.

The dollar’s slide after a very strong recent rally – the dollar index is down 0.4% for the week, just the third week of losses in the past 16 – reflects a decline in US yields. The benchmark 10-year U.S. Treasury yield is headed for a weekly decline of 17 basis points, the most weekly since July.

The plunge was triggered by a combination of the US Treasury announcing a smaller-than-expected increase in longer-term Treasury holdings and Federal Reserve Chairman Jerome Powell appearing more confident as the Fed held off on raising interest rates in his press conference after Wednesday’s press conference. Meeting.

Markets are now pricing in a less than 20% chance of a rate hike in December, compared with 39% at the start of the week, CME’s FedWatch tool showed, even as the Fed officially left the door open to further hikes in borrowing costs. on the resilience of the economy.

But the main event of the week – US earnings – is yet to come

“We had a lot of events this week, the BOJ, the Fed, the Treasury refund, the BOE, but the most important is payrolls,” said Yusuke Miyairi, FX strategist at Nomura.

“If there’s a big miss, say 100,000 compared to the consensus, I think that’s when people could really start selling dollars, I don’t think we’re at that inflection point yet, but people’s sentiment is starting to move in that direction .” ” he said.

Meanwhile, if it gets strong, people will go back to buying dollars, he said.

Analysts believe U.S. nonfarm payrolls likely increased by 180,000 jobs in October, slowing from 336,000 in September, partly due to strikes by the United Auto Workers (UAW) union against the “Big Three” automakers in Detroit, which depressed manufacturing wages.

The Bank of England joined other major central banks on Thursday in holding rates steady, and while stressing it did not expect to start cutting them anytime soon, it added another nudge to bond growth.

It only rallied to 150.3 per dollar on Friday after a tumultuous week that saw it hit a one-year low against the dollar and a 15-year low against the euro on Tuesday after the Bank of Japan adjusted its yield curve control policy. .

Central bank Governor Kazuo Ueda will continue to unwind his ultra-loose monetary policy and seek to exit a decade-long accommodative regime next year, Reuters reported on Thursday, according to six sources familiar with the central bank’s thinking.

The Australian dollar was little changed at $0.6435, just shy of a more than one-month high of $0.6456 touched on Thursday.

Both the Australian and New Zealand dollars rose 1.6% for the week, their best weekly performance since mid-July.

However, the Swiss franc, which benefited from a safe-haven offer in October, weakened this week. The dollar is heading for a weekly gain of 0.5% against the franc and was last at 0.9068 francs.

(Reporting by Ankur Banerjee and Rae Wee in Singapore; Editing by Gerry Doyle and Kim Coghill)

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