Thursday, July 5, 2018

Dollar mostly weaker ahead of Fed minutes, June jobs report

The U.S. dollar was softer across the board Thursday as investors awaited minutes of the Federal Reserve��s last policy meeting in the afternoon and looked ahead to Friday��s June jobs report while also weighing trade-war fears.

News reports that the U.S. had proposed zero tariffs on auto imports and exports between the U.S. and the European Union sparked gains for equities and other assets viewed as risky, allowing the buck to recover ground versus the Japanese yen, which is traditionally viewed as a haven, while serving to lift the euro, analysts said.

The dollar held on to a small advance versus the yen but remained weaker versus most major rivals after Automatic Data Processing Inc. reported that employers added 177,000 private-sector jobs in June. The data is watched for clues to official employment data, though it��s record as a predictor is viewed as shaky. Separately, the Labor Department said first-time jobless claims hit a six-week high, but layoffs remain near a multidecade low.

Moreover, investors have started to pay closer attention to wage data in the official jobs report, as they search for signs of accelerating pay raises that could feed inflation and persuade the Fed to raise rates more aggressively than anticipated.

While no deal has been announced, both sides want to avoid a full-scale trade war that could dent the global economic recovery, said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note.

That said, ��the specter of trade war�� still hangs over the market, he said, noting that tariffs on $34 billion worth of Chinese goods are due to take effect on Friday, leaving investors to anticipate how Beijing will retaliate. That could end up overshadowing any good news from Friday��s jobs data.

Overall, trading is expected to remain relatively muted as some U.S. investors extend the midweek Fourth of July break. U.S. markets were closed Wednesday for Independence Day.

The ICE U.S. Dollar index DXY, -0.22% �was down 0.5% at 94.229. Despite Thursday��s struggles, it remains up 2.3% so far this year.

The euro EURUSD, +0.3603% last bought $1.1712, versus $1.1657 late in the previous session.

Industrial orders in Germany, the largest economy in Europe��s trading block, came in stronger than expected in May to support expectations of an economic upturn. The reported showed a 2.6% rise in orders.

Read: European stocks drive higher, as tariff hopes rev up car makers

Read: How will investors know if there is a full-blown trade war? Here��s what Wall Street says

One dollar last bought 6.6423 of the more freely traded offshore yuan USDCNH, +0.1596% little changed for the day, and 6.6339 of the more restricted onshore yuan USDCNY, +0.1025% up less than 0.1%.

Read: Just because the economy is booming doesn��t mean that all is well

Also on the calendar, the final Markit services purchasing managers index for June is expected at 9:45 a.m. Eastern, while the Institute for Supply Management��s nonmanufacturing index for the same month is due at 10 a.m.

An extended summary of the Federal Open Market Committee��s June meeting will be issued at 2 p.m. Eastern. Investors will be watching for commentary on disputes over trade and if any alarm on the Fed��s part could put rate increases on hold. The interest-rate differential that sets the U.S. above its industrial counterparts has been a major driver of dollar gains this year.

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