Dollar Little Changed on Day as Traders Wait for Jobs Data

  • ADP and NFP awaited; job gains may be halved due to hurricanes
  • Euro pares post-weekend loss; Catalonia crisis still simmers

The dollar was little changed on the day as traders awaited the first of two sets of employment data later this week for fresh clues on the currency’s direction.

The Bloomberg Dollar Spot index declined less than 0.1 percent, and the dollar fell versus all its G-10 peers except the Japanese yen. Flows were moderate amid narrow ranges as short-term model-driven accounts and leveraged players adjusted positions. ADP employment data for September is due Wednesday, with the median estimate in a Bloomberg survey calling for a 135,000 increase in private payrolls, compared with 237,000 in August.

  • The euro is higher vs most G-10 peers, reversing some of its losses from Monday, even as the Catalonia independence crisis continues to simmer. EUR/USD, which rebounded from a brief foray below 1.1700 to its lowest level since mid-August, traded to a fresh daily high at 1.1773 in recent activity. The pair extended slightly beyond the 1.1762 interim high seen early in the U.S. session, with the greenback undercut by the decline in Treasury yields. EUR fell to 1.1696 in Asian trading before a layer of bids cushioned the drop, the common currency doing little so far to alter the perception it’s trapped inside a broader 1.1700/1.2000 range
    • EUR buyers Tuesday included funds booking profit on sales initiated after the Catalonia referendum, according to a trader in London familiar with the transactions who asked not to be identified because not authorized to speak publicly. Leveraged accounts were seen as USD buyers Tuesday, another trader said
  • GBP/USD fell to its lowest in more than two weeks after U.K. construction PMI unexpectedly dropped and indicated a contraction; GBP selling on crosses helped support EUR
  • Traders await Wednesday’s ADP employment report and Friday’s Labor Department data; both are expected to show hurricane effects, with analysts forecasting about half as much payroll growth as in August. Fed Governor Jerome Powell spoke on regulatory issues and declined to comment on reports he’s had discussions on Fed succession; Politico reported Powell is favored as next Fed chair by Treasury Secretary Mnuchin
  • USD/JPY was trading around 112.85 after a brief move toward its overnight high at 113.20, the pair capped by offers layered to 113.30, according to traders. It appears to be tracking modest swings in UST yields, a trader in New York said. Risk may be for stop-loss orders on a break of the overnight range, though support may emerge near Monday’s 112.40 low. 
  • The Japanese election Oct. 22 remains too distant to handicap, traders said. Traders see potential for USD gains in the event of a lopsided victory for PM Abe that increases the potential for a continuation of Abenomics
  • USD/CAD was trading just below 1.2500; BOC Deputy Governor Sylvain Leduc gave a speech in which he said the Canadian economy is less dynamic, but his remarks didn’t give an outlook on the central bank’s policy rate
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