Dollar Advances on Back of Stronger-Than-Expected GDP, Jobs Data

Updated on
  • Trump N. Korea tweet, S&P on debt limit restrain dollar gains
  • Traders look to monthly inflation data Thursday for direction

TD's McCormick Sees 3-4 Percent Rally in U.S. Dollar

The dollar gained on the back of robust U.S. economic data, posting a second consecutive increase for just the first time in two weeks.

The greenback rose against all of its G-10 peers save the British pound, and pushed euro-dollar below 1.1900. The dollar recouped a brief dip seen after a tweet on North Korea from U.S. President Trump and a cautionary report on the debt limit from S&P. Trump tweeted that “talking is not the answer” to North Korea’s missile threats; his defense chief later said the U.S. hasn’t exhausted its diplomatic options. S&P said a failure to raise the U.S. debt limit would be more catastrophic than the 2008 collapse of Lehman Brothers.

  • The Bloomberg Dollar Spot index rose 0.4 percent, boosted by ADP employment data that showed the U.S. adding 237k jobs in August, beating estimates of 185k; GDP grew by 3.0% in 2Q versus estimates of 2.7% growth
    • Month-end portfolio rebalancing could also be buoying the greenback, with a passive model showing “moderate” USD buying vs EUR and JPY and a “more modest dollar buying signal” vs GBP, CAD and AUD, according to Barclays strategist Juan Prada
  • Separately, Trump prodded Congress to act on a tax plan at a speech in Missouri; he said he’d like to bring the business tax rate to 15% but was light on other details of a potential plan. The S&P 500 saw its biggest gain since Aug. 22 while the 10Y UST yield was confined to its most narrow range in three months
  • EUR/USD dropped as much as 0.7 percent to fall below 1.1900, and traded near a session low of 1.1882. The euro fell as longs were stopped out and interest to fade the dip was at lower than current levels, according to Europe-based traders
    • Analysts suggest ECB’s Draghi is likely to try to talk down euro strength at the ECB’s Sept. 7 meeting
  • USD/JPY broke through 110.00 level to trade in the 110.35 range as risk appetites continued to recover in the wake of North Korea’s missile test launch
  • Commodity-sensitive currencies were weighed down by cross selling, weak commodity prices and unfavorable yield spreads
    • USD/CAD rose to session high of 1.2637 before retreating as oil briefly spiked; CAD selling slowed by fund-related offers placed between 1.2600/10 and again at 1.2625, according to Toronto traders
    • AUD/USD hit intraday low of 0.7890 as carry and commodity trades unwind; further support seen at 0.7900/0.7880

— With assistance by Robert Fullem

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