The US dollar had a mixed run as it reacted to currency-specific events. Traders seemed hesitant to take large positions ahead of the NFP release since leading indicators have been hinting at a slowdown in hiring. The ISM non-manufacturing PMI fell from 57.4 to 53.9 while the Challenger job cuts report showed a larger 37.6% drop in layoffs. Analysts are expecting to see a 181K increase in hiring for July, enough to bring the jobless rate down from 4.4% to 4.3%. Average hourly earnings could post a stronger 0.3% uptick.
The euro continued its rally against most of its counterparts even as final services PMI readings turned out mixed. The readings from Spain and Germany saw downgrades while Italy reported an upgrade. German factory orders, Italian retail sales, and the region’s retail PMI are due next.
The pound suffered a sharp selloff after the BOE statement as fewer policymakers voted to hike rates compared to last time, signaling a shift to a less hawkish bias. The central bank also downgraded its growth forecast while maintaining its positive outlook on inflation. There are no reports due from the UK economy today.
The franc was still in a weak spot against most of its counterparts, mostly due to the SNB’s dovish stance and the threat of central bank intervention. There were no reports out of the Swiss economy yesterday and none are due today so market sentiment and SNB expectations could stay in play.
The Japanese yen was able to take advantage of dollar weakness and risk aversion even as Japanese average cash earnings data printed a weaker than expected 0.4% drop versus the projected 0.5% gain. There are no other reports due from Japan for the rest of the day so yen pairs could take their cues from bond yields and the NFP release.
Commodity Currencies (AUD, NZD, CAD)
Risk-off flows dampened gains for the commodity currencies as shifting policy biases weighed on sentiment. Australia reported a smaller than expected trade surplus of 0.86 billion AUD compared to the estimated 1.78 billion AUD figure while previous reading was downgraded. Earlier today, Australian retail sales beat expectations with a 0.3% gain. Canada will release its jobs report next and might show weaker hiring growth of 11.7K compared to the previous 45.3K increase.