U.S. Economic Data Drives Dollar Higher
Stronger economic data this morning helped drive shorts out of the Dollar and triggered a surge to the upside which put the U.S. Dollar Index in a position to post a six-month high.
Early in today’s trading session, the Dollar was trading lower as appetite for risk drove up demand for higher yielding assets. Trading was once again subdued due to tomorrow’s European Central Bank and Bank of England announcements. Many major players are also trading lighter ahead of the U.S. jobs report on Friday, February 5th.
This morning’s ADP Employment Report showed that fewer jobs were lost during January. This lent credibility to the notion that the economy is improving and that Friday’s Non-Farm Payrolls Report may actually show positive jobs growth. Traders are now feeling more confident about the economy. Some are speculating that Friday’s jobs report may actually show positive growth.
In another report, January’s ISM Non-Manufacturing Index crossed the 50 level indicating that momentum was turning to the upside. Following the release of these reports, traders reversed the course of the Dollar, indicating that investors were shifting their focus away from risk and on improvement in the U.S. economic outlook. Global currency markets sold off as demand dropped for higher yielding currencies. Both reports supported the Dollar because they provide the Fed with more information needed to begin raising interest rates.
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