Dollar Rally Stalls Ahead of Jobs Data

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Dollar Rally Stalls Ahead of Jobs Data

FEBRUARY 05, 2021

The U.S. dollar is taking a break from its impressive week and is mostly flat against its major counterparts. 

Overview

The risk rally, however, is showing no signs of stopping.  Both the S&P 500 and the Nasdaq closed at all-time highs yesterday. Global equities are having their best week since November.  The greenback has rallied alongside risk this week, but the dollar’s lack of movement overnight could signal a pause to the recent dollar spike.

Risk sentiment continues to gain as a stimulus deal gets closer to becoming law.  The U.S. Senate voted on party lines to adopt a budget blueprint.  Johnson & Johnson also filed for emergency use of their Covid-19 vaccine.  If approved, the U.S. would see an increase of millions of vaccines, further boosting risk sentiment.

This morning’s job data will be the main focus of the day.  The economist consensus is that the U.S. added 105K jobs in January. This would strengthen the narrative that the U.S. economy is improving and will pair nicely with possible stimulus and a strong corporate earnings season.  A miss could make stimulus more likely but could knock risk-sentiment off its high horse and lead to a quick sell-off.  Data will be released at 8:30 a.m.


What to Watch Today…

  • Non-Farm Payrolls at 8:30 a.m.

View Economic Calendar

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EUR  

The Euro looks to break its negative streak against the greenback today.  While the common currency is about 0.2% stronger today, the Euro is over 1% weaker since last Friday’s close.  The story of the Euro’s weakness this week is two-fold. First, the differing success in vaccine distribution between the U.S and Europe is stark.  While the pace has accelerated in the U.S. over the past few weeks, Europe has faltered.  In addition, widening Treasury spreads between that of the U.S. and Germany have made the greenback marginally more attractive.

CAD  

The Canadian dollar edged higher against the U.S. dollar, aided by a complacent greenback and a continued rise in the price of oil.  Brent crude traded toward $60 a barrel, a remarkable rebound from a commodity that briefly traded negative at the beginning of the pandemic.  The Norwegian krone also made notable gains against the U.S., likely due to the spike in oil.

Much, like the U.S., all eyes are on Canada’s jobs report at 8:30 a.m.

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