The dollar posted gains yesterday versus its primary rivals, managing to hold onto gains from the early hours of trading in spite of a disappointing U.S. manufacturing reading for the month of July. The manufacturing index indicated a marginal decline for the month, after having grown at its fastest pace in five months in the month of June. The index reading was 52.7% for July, down from 53.5% in Junes. Economists were expecting a reading of around 53.7%.
The report was one of the first in a busy week of data releases which will includes Friday’s nonfarm payrolls report. The jobs report for July is likely to be subject to more scrutiny than usual because the Federal Reserve recently stated that it would increase the Federal funds rate when “some further improvement in the labor market” have been noted. The word “some” was added to the statement that had been released in past reports.
Economists took the additional word to mean that growth within the labor market has been strong enough to raise the benchmark interest rate in September — the first increase since 2006. A robust NFP report could be all that the Federal Reserve needs to approve a September increase, which would push the U.S. dollar higher. Other important reports this week include U.S. factory orders, which will be released today, U.S. balance of trade data for June, expected Wednesday, and weekly jobless claims on Thursday.
The euro closed out yesterday’s the session near $1.0948. Earlier in the session, the currency managed to shake off reports which indicated strong growth within the French and German manufacturing sectors, as well as a large-scale selloff within the Greek stock market, which reopened yesterday after being closed for the past five weeks. The dollar shed some of its early gains versus the yen, last trading at ¥123.95. The ICE U.S. Dollar index has climbed 0.2% to 97.4970.
Thursday is likely to be a volatile day for markets. For the first time ever, a policy statement from the Bank of England will be released together with meeting minutes and a quarterly inflation report. The pound dropped to $1.5583, falling 0.3% from $1.5622 on Friday.