Dollar Strong ahead of FED Event

Daily Update - 02nd May 2018

Yesterday’s Market

• GBP Markit Manufacturing PMI & Mortgage Approvals
• USD ISM Prices Paid & ISM Manufacturing PMI
• CAD Gross Domestic Product & BOC Governor Poloz Speech

Yesterday Explained

The dollar was once again the overall winner, extending its gains to multi-month highs against most of its major rivals. In spite of disappointing ISM Manufacturing figures dollar rose upwards on the back of resurgent treasury yields. The Pound took another hit as Markit Manufacturing PMI and Mortgage Approvals came out negative putting further pressure on the pound.

Canadian dollar had support from better than expected GDP Figures while BOC Governor Poloz’s speech uplifted the currency as well. US ISM Prices were better than expected while Manufacturing figures were disappointing. Nevertheless, Dollar stood strong against all it’s major rivals as strong treasury yields and optimistic comments from FED members regarding the Wednesday FED meeting.

Today’s Market

• EUR Markit Manufacturing PMI, GDP Report, Unemployment Rate
• USD ADP Employment Change, Fed’s Monetary Policy Statement, Interest Rate Decision

Today’s Focus

It will be a busy day for traders as the all-important FED decision and Euro zone GDP figures are to be released. The first half belongs to Euro zone with the release of GDP figures of different European countries. The figures will be scrutinized for any hints as Mario Draghi suggested that euro-zone growth has slowed down or “moderated” after some countries reported mixed growth reports. Along with GDP we will also see Markit Manufacturing PMI which captures business conditions in the manufacturing sector and Unemployment Rate which shows the number of unemployed workers divided by the total civilian labor force

Before the FED decision we will see ADP Employment Change report which is a measure of the change in the number of employed people in the US. Having just raised interest rates at their last meeting, the Fed has no plans to follow up in May but Fed fund futures show a 93% chance of a quarter point rate hike the following month when economic projections are updated and Jerome Powell holds a press conference.

U.S. policymakers have been vocal about their desire to raise interest rates at least 3 times this year and the data improvements since the last policy meeting gives them the confidence to take action in the summer. Central bankers always prefer to minimize volatility on the day that a policy change is made, so if the Fed is serious about a June hike, they will signal their intention at Wednesday's meeting which would send the dollar even higher.