Dollar plumbs three-week low ahead of US payrolls report

Dollar fell in European trade on Friday against a basket of major rivals, extending losses for the third straight session and plumbing a three-week trough as US treasury yields lose ground as well.

The dollar is heading for the worst weekly loss since March especially if the US payrolls report missed the mark today. 

The Index

The dollar index fell 0.2% today to 105.14, the lowest since April 13, with a session-high at 105.37, after closing down 0.3% on Thursday, the second loss in a row as US yields declined while risk appetite improved. 

Weekly Trades

The dollar index is down 0.9% so far this week on track for the heftiest weekly loss since March.  

US Yields

US 10-year treasury yields fell 0.6% on Friday, on track for the third straight loss, plumbing two-week lows at 4.563%. 

The developments came after the Federal Reserve’s policy meeting this week, which proved less aggressive than expected, in turn boosting hopes of rate cuts this year. 

The Fed

The Federal Reserve announced its decision to maintain interest rates unchanged between 5.25% and 5.5% for the sixth straight meeting.

The Fed’s policy statement indicates it doesn’t expect to perform any rate cuts until there’s enough confidence that inflation is moving sustainably towards 2%.

Powell

Fed Chair Jerome Powell said in his press conference on Wednesday that the Fed expects policies to remain restrictive for sometime in order for inflation to hit the 2% target. 

He added that he doesn’t expect the next policy step to be a rate hike, however he doesn’t expect a rate cut until inflation is reliably heading towards 2%. 

He asserted that inflation readings so far this year weren’t encouraging, and it could take longer than expected. 

US Rates

According to the Fedwatch tool, the pricing for a Fed interest rate cut in June is standing at 14%, while the pricing for such a cut in July stood at 35%. 

Investors now barely price in just a single rate cut this year. 

US Payrolls

The US government will release the crucial US payrolls report later today, expected to show the addition of 238 thousand new jobs in April, slowing down from 303 thousand in March. 

Unemployment claims are expected to remain at 3.8%, while average hourly earnings are estimated to have risen by 0.3%.