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Richard Pontius Foreign Exchange Advisor
The dollar remains on firmer footing today following comments yesterday from Treasury Secretary Janet Yellen. Yellen initially commented that U.S. interest rates may “have to rise somewhat” to make sure that the economy does not overheat. As her comments hit the news wires, U.S. equity markets fell while 10-year yields rose slightly and the dollar benefitted modestly. Later came a clarification from Yellen in which she stated that tighter policy was “ not something I’m predicting or recommending.” While the market’s reaction was not sizable, the damage was done. The interest-rate-sensitive NASDAQ ended 262 points lower on the day. The DJIA and S&P were able to recover early losses to end modestly in positive territory.
Today has brought the initial glimpse of what we might see in terms of payroll data scheduled for Friday. The ADP measure of employment change reported an increase of 742,000 jobs. This was below expectations for a reading of 850,000. Tomorrow brings initial jobless claims before the Labor Department’s release of non-farm payrolls on Friday. Nearly 1 million jobs are expected to have been generated during the month of April. Additionally, the unemployment rate is expected to fall to 5.8% from 6.0% in March.
As today opens, the dollar is once again slightly stronger following yesterday’s risk-off session. Commodity prices continue to be well bid, with copper once again reaching a record high. A broad range of commodities, including food groups, oil and gold, are all up on the day. Hints of inflation and rising prices should be dollar supportive in the near term but are not expected to have anything more than a brief reprieve from the sizable losses that have taken place since late March.
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