US Dollar Gains Traction Ahead of Key July Jobs Report
- US dollar advances ahead of major peers as traders look to Friday’s jobs report
- Fed Vice Chair Richard Clarida says the US central bank could start raising rates in 2023
US Dollar Gains Traction
The US dollar advanced broadly on Wednesday, propelled higher by traders and investors who anticipate the latest jobs data due Friday. The sharp rebound of the greenback led to a decline among major currencies across the board, including the euro, the British pound, and the Swiss franc.
The EUR/USD declined heavily on Wednesday as the euro slid as much as 0.26%, or about 30 pips, reaching a closing price of 1.1836. The exchange rate maintained a downward trend for a second consecutive day. Wednesday trading in the pair was highly volatile as the rate swung from a session high of 1.1900 to an intraday low of 1.1830.
The recent low in the EUR/USD rate brought the pair to a one-week low as the market reacted to comments by Federal Reserve Vice Chair Richard Clarida. In a virtual appearance at the Peterson Institute for International Economics, the Fed Vice Chair said the US central bank will most likely reach its economic goals by the end of next year and start raising interest rates in 2023.
“Commencing policy normalization in 2023 would, under these conditions, be entirely consistent with our new flexible average inflation targeting framework,” Fed Vice Chair Clarida said during his speech.
Mr. Clarida’s comments on the US economy and Fed’s policy approach triggered heightened volatility in the currency market, particularly US dollar pairs. The GBP/USD reacted to the downside, as the pair reversed from a session high of 1.3960 to a close of 1.3890.
All Eyes on Friday’s Report
The USD/CHF pushed higher by about 30 pips, finishing the session at 0.9069. The USD/CHF snapped a seven-day losing streak as it had been in a solid decline that had erased about 160 pips, or 1.7%, prior to Wednesday’s trading.
Meanwhile, currency traders have set their focus on Friday’s nonfarm payrolls report. The jobs statement released by the US Labor Department will show how many Americans found work in July. The report is considered a major market update, indicating the health of the US economy. Increased volatility is to be expected at the time of the release.
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