The U.S. dollar remained in a narrow range on Thursday, as investors assessed mixed economic indicators in anticipation of the highly-anticipated payroll report at the end of the week.
At 05:35 ET (09:35 GMT), the Dollar Index, which measures the dollar against six major currencies, edged slightly higher to 103.917, after reaching a late-July peak earlier in the week.
Dollar Stability Amid Uncertain Economic Indicators
The dollar’s recent gains have stalled, as mixed economic data leaves ambiguity around the strength of the U.S. economy. U.S. private payroll data indicated a surge in October, but job openings in September dropped to their lowest level since January 2021.
Additionally, the U.S. economy expanded at an annualized rate of 2.8% in the third quarter, slightly under the 3% economists had expected.
Thursday’s economic releases include weekly jobless claims and the core PCE deflator, the Federal Reserve’s favored inflation measure. However, primary attention remains on Friday’s nonfarm payrolls report.
The upcoming U.S. presidential election has also influenced market sentiment, with traders leaning towards the dollar on expectations of a Republican victory, despite a tight race with Vice President Kamala Harris.
According to ING, the Dollar Index (DXY) is near support at 104.00 and could face a modest pullback to around 103.65 after a strong upward trend.
German Retail Sales Show Unexpected Growth
In Europe, EUR/USD remained stable at 1.0857 as German retail sales unexpectedly increased by 1.2% in September compared to the previous month, while the German economy posted a modest 0.2% growth in the third quarter.
Despite this, the European Central Bank (ECB) is likely to continue its rate-cutting cycle, especially if eurozone inflation data, due later, falls below the ECB’s 2% target. The ECB has reduced rates three times this year, including a recent back-to-back cut, a first since the 2011 euro crisis.
ING noted that EUR/USD might retest its previous high of 1.0870 but is unlikely to breach 1.0903 with the upcoming U.S. election.
Other Currency Movements
- GBP/USD gained 0.1% to 1.2976 following the new Labour government’s first budget, which some see as “old Labour” tax-and-spend policies. While the budget initially boosted the pound, ING predicts the Bank of England will not adjust its monetary policy in response.
- USD/JPY declined by 0.6% to 152.47, as the yen strengthened even after the Bank of Japan maintained ultra-low interest rates. BOJ Governor Kazuo Ueda indicated the central bank would closely watch global developments when deciding on policy changes.
- USD/CNY rose by 0.1% to 7.1192 following China’s October manufacturing PMI, which moved above 50, indicating growth after six months of contraction.
