Dollar Rally Ahead? By James Sackey

The remainder of the week has investors awaiting some critical data such as production and manufacturing from the U.K. and jobless claims in the U.S. but the biggest piece of data will definitely come in the form of inflation scheduled to be released Friday morning.

CPI is expected to bring about a possible reversal in the dollar which has suffered a long losing streak against the other major currencies. After a much stronger than expected Non Farm Payrolls report last Friday (222k vs 179k forecasted) accompanied by strong a Job Openings and Labor Turnover report (6.2M vs 5.7M forecast) early Tuesday, and unemployment falling 4.4% to 4.3%, momentum in thedollar was able to snap weeks of long uptrends in both the euro and the pound. Inflation may very well be the last piece of the puzzle before there’s no more significant news scheduled until closer to the end of the month.

My analysis of the better than expected NFPs number (which measures jobs added for July) paired with the JOLTS data (that measures jobs vacancies in July) and a sampling of wage information from the Bureau of Labor Statistics’ Friday report stating, “In July, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents to $26.36 … In July, average hourly earnings of private-sector production and nonsupervisory employees increased by 6 cents to $22.10.”, indicates solid demand for the month of July and that the inflation number this Friday may very well beat the forecasted 1.7%. A beat on the forecast would send the dollar soaring against the majors and likely see a deeper slide for the euro and sterling into next week. Although there is still a good bit of data to get through before Friday morning, we could see EUR/USD falling through the 1.17 handle, GBP/USD to the 1.29 handle, and USD/JPY rally over the 111 handle.

JS09 By James Sackey – Aug 09, 2017 12:56AM ET


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