U.S. Dollar: U.S. Employment Picture Remains Shaky Ahead Of Non-Farm Payrolls Release

1. With the markets in a relative standstill for most of the day, the ADP employment report at least helped to keep currencies slightly higher against the US dollar into the New York close. According to the morning’s labor market report, US employment continues to remain weaker than expected.
   For the month of August payrolls were cut by a pessimistic 298,000 jobs. The figure fell below market estimates, which were set at 250,000 for the month. As a result, even as it seems that the economy may be on the rebound, company executives continue to reduce costs in order to boost profitability in the third quarter.
   The decline has more implications when taking into account the fact that little more than two thirds of overall US economic growth is dependant on consumer spending habits. With unemployment continuing its rise, fears are now surfacing that spenders may be a dying breed, crimping what recovery the world’s largest economy has experienced in the last three months.
   Taking a look ahead, today’s results will continue to weigh on the greenback ahead of Friday’s release of the non-farm payrolls report. Expected to show a slightly lesser decline in payroll cuts for the month, the government release is still expected to show a rather soft employment outlook. Ultimately, these results will help feed further economic growth concerns as it is more than evident that other economies are bouncing back faster than the US.
   Fed Extension Consideration
   Not surprisingly, it was released today in the Federal Reserve meeting minutes that policy makers had toyed with the idea of an extension to the purchase of mortgage backed securities program.
   The idea surfaced as central bankers continue to fret over the current market situation, which continues to remain “vulnerable to adverse shocks”, while attempting to find an appropriate exit strategy. This statement is particularly worrisome as policy makers continue to reign in some public hopes that a sharp recovery may be forming.
   Notably, according to today’s release of the meeting minutes, the Fed sees the pace of growth in the second half of the year to slow slightly compared to a more brisk pace which was anticipated earlier. Additionally, depressed labor markets continue to plague the U.S. economy, convincing some that an exit strategy would be nothing short of premature.
   Traders will now more than likely keep bets for a rate hike at a minimum following today’s release, as futures show low probabilities of the event. Subsequently, the sentiment will likely keep bids high for other currencies, particularly the Euro and Australian dollar.
   Both currencies have higher yield advantage over the greenback and are currently avoiding economic difficulties similar to the British economy.http://www.onlineforextrading.com/blog/author/jeffrey-blackman/