Dollar Selloff Halts Before Last Pre-Election Payrolls Report

  • Index versus 10 currency peers still heads for weekly loss
  • Bigger picture is next week’s election result: Mizuho’s Jones

Zentner: Jobs Data Bar Not Set High for Dec. Fed Hike

In a turbulent week with the U.S. election drawing near, the dollar regained some poise before a jobs report that may -- if briefly -- focus attention on an improving labor market.

A measure of the greenback halted a five-day slide, it’s longest tumble since early July, that coincided with polls showing the race for the White House had narrowed. Democrat Hillary Clinton was shown holding on to a slim lead over Republican Donald Trump or even at a tie.

The tightening race is overshadowing increased odds that the Federal Reserve will raise interest rates in December for the first time in a year. That’s left the dollar gauge headed for its first weekly drop since September. The payrolls report Friday will show employers added 173,000 jobs in October, up from 156,000 the previous month, according to the median estimate in a Bloomberg survey.

“Non-farm payrolls is still important, but politics is trumping economics right now, for lack of a better word,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. The number “will be OK today, so the dollar probably will be OK and may get a bit of a rally. The bigger picture will be the political ramifications depending on who wins next week,” he said.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed of 6:45 a.m. New York time. It’s still down 0.8 percent this week, set for the first drop since Sept. 30. The greenback was at 102.98 yen and also little changed at 97.36 Swiss centimes and at $1.1095 per euro, snapping a three-day decline.

A New York Times/CBS poll found Clinton ahead 45 percent to 42 percent among likely voters, tighter than her nine-point lead in the same poll in mid-October. The margin of error is plus or minus three percentage points. A Washington Post/ABC News tracking poll found Clinton ahead within the margin of error, 47 percent to 45 percent, having lost ground to Trump since last week.

Political Risk

Clinton’s narrowing lead in the polls helped extend the dollar gauge’s loss this year to about 2.8 percent as investors hedge against a Trump win. The Republican candidate is perceived to be more unpredictable than his Democratic rival and investors are concerned that he would likely upend U.S. trade agreements.

The U.S. currency’s weakness comes despite the implied probability of a Fed rate increase next month climbing to 78 percent from 69 percent at the end of last week, according to fed funds futures data compiled by Bloomberg.

Payrolls “has less potential significance than is often the case for obvious reasons, with the U.S. election looming,” said Neil Mellor, a London-based currency strategist at Bank of New York Mellon Corp. “A hike is pretty much priced in and it’s going to take something quite extraordinary to derail that, data-wise. Election-wise, there is still that potential of course.”

— With assistance by Lilian Karunungan

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE