The U.S. dollar (USD) is in a bit of a standstill as investors wait for the non-farm payroll (NFP) data for May, expected to drop at 12:30 PM Japan time.
Currently, the US Dollar Index (DXY), which measures the dollar against six prominent currencies, is hovering around 99.40, showing little movement.
Today’s performance of the US dollar, particularly against other major currencies, varies. It seems the dollar is notably stronger against the Australian dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | -0.02% | -0.05% | -0.03% | 0.16% | 0.10% | -0.03% | |
| EUR | 0.03% | 0.00% | 0.00% | 0.00% | 0.19% | 0.11% | 0.01% | |
| GBP | 0.02% | -0.01% | -0.02% | -0.02% | 0.17% | 0.10% | -0.01% | |
| JPY | 0.05% | 0.00% | 0.02% | 0.02% | 0.20% | 0.14% | 0.01% | |
| CAD | 0.03% | -0.00% | 0.02% | -0.02% | 0.18% | 0.12% | 0.00% | |
| AUD | -0.16% | -0.19% | -0.17% | -0.20% | -0.18% | -0.06% | -0.18% | |
| NZD | -0.10% | -0.11% | -0.10% | -0.14% | -0.12% | 0.06% | -0.12% | |
| CHF | 0.03% | -0.01% | 0.00% | -0.01% | -0.00% | 0.18% | 0.12% |
The table reflects changes in value against major currencies. For instance, if you look at USD versus JPY, the box indicates the percentage change between these currencies.
According to expectations from the U.S. Bureau of Labor Statistics (BLS), employers are likely to have added 85,000 jobs in May, a decrease from April’s figure of 115,000. The unemployment rate is projected to stay steady at 4.3%.
When it comes to wage growth, the year-on-year increase in average hourly wages is anticipated to drop to 3.4% from 3.6% last year. However, on a monthly basis, growth is expected to be a bit faster, around 0.3%, compared to April’s 0.2%.
The release of the employment report is typically quite significant for market expectations regarding the Federal Reserve’s (Fed) monetary policy. Still, unless there are major shifts, the influence might not be strong, given the Fed’s recent focus on rising inflation rather than a softening job market.
Last week, Neil Kashkari, the President of the Federal Reserve Bank of Minneapolis, emphasized that inflation is currently the biggest concern, overshadowing the labor market’s situation. It seems, however, that attention to both issues is necessary.
“Right now, inflation poses the greatest risk to the economy,” Kansas City Fed President Jeffrey Schmidt noted, mentioning that the critical question is whether the Fed will maintain its patience with interest rates or opt for increases to curb inflation.
On the geopolitical side of things, market watchers are keenly awaiting updates from both the U.S. and Iran regarding their negotiations towards a lasting peace agreement.
US Dollar Frequently Asked Questions
The U.S. Dollar (USD) serves as the official currency for the United States and is commonly used in various other nations. The dollar is the most widely traded currency globally, making up over 88% of all foreign currency trading, equating to an average daily trading value of $6.6 trillion, according to 2022 figures. Since World War II, the dollar has taken over as the world’s reserve currency, having overshadowed the British pound. Historically, it was linked to gold until the gold standard was discarded in 1971 under the Bretton Woods agreement.
The primary influence on USD’s value stems from monetary policy decisions made by the Federal Reserve System (Fed). The Fed aims to strike a balance between controlling inflation and fostering full employment. Interest rates are their main tool for achieving these goals. If inflation rises above the Fed’s 2% target, they typically raise rates to support the dollar’s value. Conversely, if inflation dips below that threshold or unemployment rises too high, the Fed may cut rates, which could drag down the dollar’s value.
In drastic situations, the Federal Reserve may resort to printing more dollars and implementing quantitative easing (QE), a strategy to inject credit into a faltering financial system. This approach is typically used when banks are hesitant to lend to one another due to default fears. This was notably employed during the 2008 financial crisis, involving the Fed purchasing U.S. Treasuries from financial institutions with newly printed dollars. Though effective in some ways, QE generally results in a weaker dollar.
On the flip side, there’s quantitative tightening (QT), which occurs when the Federal Reserve halts its bond purchases and does not reinvest the principal of matured bonds. This usually has a positive effect on the dollar.
