Daily Insight

The unrelenting decline of the Dollar continued yesterday as the U.S currency fell to a fresh 26-year low against the Pound as the reaction following the FOMC statement on Wednesday suggested traders had interpreted the comments as more dovish than hawkish.

The Federal Reserve elected to cut U.S interest rates to 4.50% in October, the second reduction in two months, while the accompanying statement seemed to indicate that policy makers were becoming concerned with rising commodity prices and the potential impact on inflation.

The price of crude oil rose above 96% a barrel yesterday and to the highest level on record as U.S inventories unexpectedly fell and the economy expanded at the fastest pace in more than a year.

In terms of economic data, the Dollar was hampered by reports that growth in U.S manufacturing slowed by more than initial forecasts last month as industrial orders declined and output contracted.

Elsewhere, the personal income and expenditure report showed that consumer spending had rose less than expected for September as falling house prices dimmed confidence.

The focus today will fall squarely on the monthly U.S employment report where a strong increase in payrolls could determine whether the Dollar has hit the bottom.

The market has factored in an increase of 85,000 jobs in October following a gain of 110,000 the previous month although the unexpected increase in the ADP employment report had led to speculation of a bigger increase.

In addition, a drop in weekly jobless claims may show that the economy added a far higher number than anticipated and the Dollar may make gains amid the diminishing prospect of a December rate cut.


Data Released 2nd November

EU 09:00 Manufacturing PMI (October)

U.S 13:30 NonFarm Payrolls (October)

- Unemployment / Average Earnings

U.S 14:00 Factory Orders (September)

written by Adam Solomon