Dollar gains before Fed meeting, jobs data

FILE PHOTO: U.S. Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Karen Brettell

NEW YORK (Reuters) – The dollar rose on Monday after data showed that U.S. manufacturing pulled off a three-year low in April before a busy week for central banks, with the Federal Reserve expected to raise interest rates by an additional 25 basis points on Wednesday.

The Institute for Supply Management (ISM) said that its manufacturing PMI rose to 47.1 last month from 46.3 in March, which was the lowest reading since May 2020.

“Broadly, the data show that the manufacturing sector is still in a recession, but there are some encouraging signs of stabilization in the details,” Thomas Simons, a money market economist at Jefferies, said in a note.

Other data on Monday showed that U.S. construction spending increased more than expected in March, boosted by investment in nonresidential structures, but single-family homebuilding remained depressed amid higher mortgage rates.

Read More: Wall Street surges, Treasury yields rise as solid earnings offset weak data

Trading was largely subdued, however, as investors waited on the conclusion of the Fed’s two-day meeting, where the focus will be whether the U.S. central bank indicates that it expects to pause rate increases after May, or if it keeps the possibility of an additional hike in June or later alive.

“Many people say the Fed will signal that it’s going to pause, and I don’t think it can afford to do that,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, adding that “the Fed wants to maintain some optionality and flexibility.”

The dollar gained on Friday after data showed that core inflation stayed elevated in March. Consumer price inflation data next week will also be watched for further signs of inflation remaining high.

Jobs data on Friday is this week’s main economic focus. It is expected to show that employers added 180,000 jobs in April.

The dollar index was last up 0.35% on the day at 102.08. The euro fell 0.37% to $1.0974. The single currency is holding just below a one-year high of $1.1096 reached last Wednesday.

Read More: Wall Street ends sharply lower, Treasury yields slide as recession fears mount

The European Central Bank (ECB) is widely expected to raise rates for the seventh straight meeting on Thursday, with a 50 basis points increase on the table.

The yen hit a seven-week low against the dollar after the Bank of Japan on Friday kept ultra-low interest rates but announced a plan to review its past monetary policy moves.

The dollar was last up 0.74% at 137.35 yen.

The Reserve Bank of Australia is also widely expected to extend a rate pause on Tuesday.

The Aussie dollar was last up 0.42% at $0.6645. It is up from a seven-week low of $0.6573 on Friday.

Trading volumes were thin on Monday with markets in many countries closed for the May Day holiday.


Currency bid prices at 11:06AM (1506 GMT)

       Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid          

                                                   Previous                   Change                              


       Dollar index                 102.0800       101.7300    +0.35%         -1.362%       +102.1000   +101.6200          

       Euro/Dollar                  $1.0974        $1.1017     -0.37%         +2.43%        +$1.1043    +$1.0973          

       Dollar/Yen                   137.3450       136.3400    +0.74%         +4.76%        +137.3550   +136.2000          

       Euro/Yen                     150.78         150.08      +0.47%         +7.46%        +150.9500   +150.0400          

       Dollar/Swiss                 0.8959         0.8944      +0.17%         -3.11%        +0.8959     +0.8916          

       Sterling/Dollar              $1.2510        $1.2569     -0.46%         +3.45%        +$1.2570    +$1.2511          

       Dollar/Canadian              1.3543         1.3539      +0.03%         -0.04%        +1.3583     +1.3530          

       Aussie/Dollar                $0.6645        $0.6617     +0.42%         -2.52%        +$0.6668    +$0.6608          

       Euro/Swiss                   0.9831         0.9853      -0.22%         -0.65%        +0.9855     +0.9823          

       Euro/Sterling                0.8771         0.8766      +0.06%         -0.83%        +0.8794     +0.8760          

       NZ                           $0.6173        $0.6189     -0.17%         -2.70%        +$0.6199    +$0.6167          


       Dollar/Norway                10.7470        10.6520     +0.69%         +9.28%        +10.7490    +10.6710          

       Euro/Norway                  11.7970        11.7471     +0.42%         +12.42%       +11.8170    +11.7191          

       Dollar/Sweden                10.3282        10.2505     +0.33%         -0.76%        +10.3303    +10.2467          

       Euro/Sweden                  11.3346        11.2976     +0.33%         +1.66%        +11.3445    +11.2885          

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