Karen Brettell
NEW YORK (Reuters) – The dollar rose to a three-week high against the euro on Wednesday after ADP’s national jobs report showed U.S. private sector payrolls rose more than expected in September, ahead of Friday’s long-awaited employment data.
Traders are also closely monitoring geopolitical tensions a day after Iran attacked Israel in a strike that raised fears that the oil-producing Middle East could be engulfed in a wider conflict.
Private-sector payrolls rose by 143,000 last month, following an raise of an upwardly revised 103,000 in August, according to Wednesday’s ADP national jobs report. Economists polled by Reuters forecast that 120,000 jobs would be added.
“The ADP number looked pretty good and indicates a decent NFP print,” said Brad Bechtel, global head of FX at Jefferies in New York.
The government’s nonfarm payrolls report for September released on Friday is expected to show that employers added 140,000 jobs during the month, while the unemployment rate held steady at 4.2%, according to economists polled by Reuters.
Improving economic data and more hawkish comments from Federal Reserve Chairman Jerome Powell on Monday strengthened the dollar and prompted investors to withdraw bets that the U.S. central bank will cut interest rates by another 50 basis points at its meeting next month.
“There’s a subtle shift happening here: people are less concerned about the United States, they’re setting lower prices in the context of aggressive U.S. interest rate cuts, and they’re changing their views on other areas,” Bechtel said.
Traders are now pricing in a 35% probability of a 50-basis-point cut at the Nov. 6-7 Fed meeting, up from 57% a week ago, CME Group’s (NASDAQ:) FedWatch Tool shows.
Richmond Fed President Thomas Barkin said Wednesday that last month’s 50-basis-point cut is an acknowledgment that the interest rate is “out of sync” with the economy but should not be taken as a sign that the fight against inflation is over. ready.
Thursday’s non-manufacturing sector report from the Institute for Supply Management will also provide further clues about the strength of the U.S. economy.
The rate rose 0.42% to 101.68, the highest since September 11, and the euro fell 0.27% to $1.1037, the lowest since the same day.
The single currency weakened as expectations grew that the European Central Bank would cut interest rates later this month as inflation falls.
Euro zone inflation is increasingly likely to return to the ECB’s 2% target, ECB board member Isabel Schnabel said, abandoning her long-standing warning about the difficulty of containing price rises.
The yen also fell after Prime Minister Shigeru Ishiba said after Wednesday’s meeting with Bank of Japan Governor Kazuo Ueda that Japan was not in the climate for an additional interest rate raise, an apparent attempt to shed his reputation as a monetary hawk.
The dollar gained 1.94% to 146.34 yen.
The dollar also gained on demand for sheltered markets amid concerns about escalating tensions in the Middle East.
Israeli Prime Minister Benjamin Netanyahu vowed that Iran would pay for Tuesday’s missile attack on Israel, while Tehran said any retaliation would be met with “enormous destruction,” raising fears of a wider war.
In cryptocurrencies, bitcoin fell 0.11% to $60,712.
