28 October 2016
US non-farm payrolls will be known on June 3 when the federal government releases its latest jobs data. Photo: Bloomberg
US non-farm payrolls will be known on June 3 when the federal government releases its latest jobs data. Photo: Bloomberg

US dollar strengthens amid growing rate hike expectations

All eyes are on the upcoming US non-farm payroll data out on June 3.

The figures are expected to show an increase of 170,000 jobs in May, slightly more than in April, and a 0.2 percent bump to the hourly wage.

Also, the European Central Bank is likely to leave interest rates unchanged at its next meeting on Thursday and reiterate stimulus measures announced in March.

It might raise its inflation forecast for this year and next thanks to a recovery in oil prices.

The US Dollar Index rose to 95.968 at one point on Monday amid rising expectations for a US rate hike, up 4.4 percent from the trough of 91.919 in early May.

The euro tumbled to a new low against the US dollar after a slipping 2.7 percent last month, the first monthly decline in four months.

The European unit has been losing ground against the dollar since early May. It fell to 1.1096 on Monday, close to the 250-day moving average of 1.1095. It might ease further to 1.1000 or even 1.0800 if it breaks below that level.

The greenback surged to a one-month high of 111.43 against the yen but fell back.

The greenback is testing 112 and might hit the 100-day moving average of 112.4 or 113.8.

The US dollar soared to 0.9955 against the Swiss franc on Monday, the highest in more than two months.

The resistance level is around 0.995 to 1 and the 50-day moving average support level is around 0.971.

Meanwhile, Australia’s exports staged a strong rebound in the first quarter. Building approvals surprisingly increased by 3 percent in April, instead of an expected 3 percent decline.

That set of encouraging economic data has thwarted market expectations for another rate cut this year.

The Australian dollar bounced to 0.724 against the US dollar.

Prudent economic growth would offer more leeway for the Reserve Bank of Australia to hold back further rate cuts.

The odds for another rate cut on June 7 fell to 6 percent.

The Australian dollar has been struggling after tumbling below the 200-day moving average of 0.7255 against the US dollar on May 18.

If the aussie continues to hover below that level, it might face more downside pressure and test a new low at 0.715.

The New Zealand dollar moved in tandem with its cross-Tasman counterpart, rising to 0.6735 against the greenback.

However, the kiwi is likely to fall back and might tumble to the 0.656 level.

London gold prices slid to US$1,199.6 per ounce, the lowest in three and a half months.

The yellow metal lost 6.3 percent in May, the biggest monthly decline since November.

Gold has broken US$1,200 for the first time since mid-February and returned to the 100-day moving average. A further easing to US$1,133 is possible.

Silver tumbled to a seven-week low of US$15.85 but should have some support at US$15.8 or the 100-day moving average of US$15.67.

However, it might see more downside if it falls any further.

This article appeared in the Hong Kong Economic Journal on June 1.

Translation by Julie Zhu

[Chinese version 中文版]

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Sales director, Emperor Capital Group Limited; HKEJ columnist

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