DXY extends gains above 88.00 on jobs data optimism

Friday, November 07, 2014

The dollar index continued its upward march yesterday as the greenback gained 0.64% against a basket of major currencies to end the session just above 88.00, reaching a five and a half year high. Investors were encouraged by yesterday’s release of better than expected initial jobless claims which fell by 10,000 w/w to 278K, coming in 7,000 below the 285K new claims expected by market participants in a Bloomberg poll. The dollar index is on track to add a third consecutive week of gains and having strengthened just over 10.0% against its major peers the potential for further upside remains robust ahead of non-farm payrolls data and the unemployment rate, both due out later this afternoon. Market participants expect a 235K increase in non-farm payrolls for October, a slight dip from the previous month’s 248K increase with significant expansion coming from manufacturing payrolls while the unemployment rate is expected to remain unchanged in October, holding at 5.9%.

Three month LME nickel and copper prices were on track for weekly losses after selling pressure earlier in the week saw previous gains retrace as key areas of support were tested. Investors in the industrial metals exercised caution ahead of the release of Chinese trade data, due out tomorrow. Market participants expect export growth to slow in October from the 15.3% y/y acceleration seen the previous month to an anticipated 10.6% y/y growth rate. Import are also expected to slow in October with an anticipated 5.0% y/y increase from the previous month’s reading of 7.0% y/y. Despite the expected slowdown in import and export growth the trade balance is expected to improve from $30.96bn in September to $42bn in October as export demand still remains robust. In stark contrast to the copper and nickel, three month LME aluminium prices were on track to extend gains for a fifth consecutive week with prices this morning holding firm above $2,060/tonne, having rallied 7.4% since the start of October.

Spot gold prices are set to close lower for the third straight week, on track to extend declines by as much as 3.0% this week as investment demand dissipates. The yellow metal has lost as much as 7.7% over the past three weeks as improving economic conditions in the US and the recent supportive measures by the Bank of Japan coaxed investors back to global equity markets. Prices hit a fresh year-to-date low early on today, slipping back towards $1,132.16/oz before recovering back above $1,140/oz as physical buying interest progresses at the lower levels. Investors remain cautious to further sharp downside moves and will be paying close attention to non-farm payrolls data today as risk appetite and investor confidence in the US economy improves.

DXY rallies above 88.00 on hopes for a stronger US labour market

DXY Curncy DOLLAR INDEX SPOT 2014 11 07 07 40 27

3-M LME aluminium prices on track to close higher for the fifth straight week

LMAHDS03 Comdty LME ALUMINUM 3 2014 11 07 07 55 23

Events for today

0700

DE

Sep

Trade Balance

0930

UK

Sep

Trade Bal & Non EU

1330

US

Oct

NF Payrolls & Unemployment

2000

US

Sep

Consumer Credit

0200

CN

Oct

Trade Balance (08/11/2014)

More from: Kash Kamal