The US dollar index, which measures the performance of the greenback against a basket of major currencies, edged lower at the start of the European session. Investors appear cautious ahead of the release later today of the US non-farm payrolls report, one of the most closely watched events on the economic calendar for currency markets. The report is expected to show that around 110,000 jobs were created in May, while the unemployment rate is forecast to remain unchanged at 4.3%. The resilience of the US economy, together with the inflationary pressures stemming from higher energy prices following the US-Iran conflict, has underpinned the dollar's strength against its peers in recent months and prompted a sharp repricing of Federal Reserve policy expectations, erasing previous bets on interest rate cuts. Markets are now firmly pricing in a single 25-basis-point rate hike this year. Today's labour market data could either reinforce that view if the figures exceed expectations or, should the report disappoint, prompt investors to reassess the outlook, possibly extending the dollar's losses seen earlier in the session.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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