Forex: USD lower against major peers ahead of jobless claims

on Jul 3, 2013
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The US dollar has started to regain recently lost ground, with the market anticipating fresh support from jobless data due to be released during the American session. Amongst the major USD quotes currently in European trading:

– The EUR/USD has rebounded from monthly lows to be at 1.2966, with gains limited.
– The USD/JPY has fallen from its monthly high at 100.85, reached in Asian trading today, to be at 99.57.
– The GBP/USD rose sharply to 1.5258 with the start of the European session after earlier being at one-month lows.

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Yesterday, the US Federal Reserve Bank of New York president, William C. Dudley, said in an address in Stamford, Connecticut that US economic growth will probably speed up in 2014, which could allow the central bank to reduce its $85 billion/month asset buying programme.
Dudley, who has been a consistent supporter of the increased fiscal stimulus programme and who is also vice-chairman of the Federal Open Market Committee, added that “the private sector of the economy should continue to heal, while the amount of fiscal drag will begin to subside.”

In a comparison with Japan’s economic situation, he said that “the Fed must ensure that the US will not slip into a prolonged deflationary slump like Japan”. Further, that “inflation expectations are still pretty firmly anchored consistent with our 2 percent inflation objective and it’s really important that we keep it that way.” According to Dudley, the Fed’s policy “is basically designed to prevent, to reduce to the absolute minimum amount possible, any risk of a Japanese-style outcome here in the United States”.

And according to the June 19 statement of the Fed’s chairman Ben Bernanke, US GDP is expected to expand by between 2.3 and 2.6 percent this year and between three and 3.5 percent in 2014.
Back to the NY Fed’s Dudley: “If labour market conditions and the economy’s growth momentum were to be less favorable than in the FOMC’s outlook, I would expect that the asset purchases would continue at a higher pace for longer.”
The Challenger US Job Cuts and ADP US Employment Change for June are due out at 12:30 and 13:15 BST respectively.
The weekly report on US jobless claims follows at 13:30 BST. New data on employment is expected on Friday.

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