US Dollar drifts lower for fourth straight day with all eyes on PCE inflation report

LONDON (October 31) The US Dollar Index (DXY) edges down on Thursday, extending the mild losses seen over the last four sessions. Still, the US Dollar (USD) remains near three-month highs and is on track to close its best monthly performance in more than two years. 

US macroeconomic data continues endorsing the rhetoric of a strong economy in a period of global slowdown, which gives the USD a competitive advantage against the rest of the major currencies.

The ADP employment report beat expectations on Wednesday, easing concerns about a deterioration of the labour market and improving investors’ expectations about Friday’s Nonfarm Payrolls (NFP) report.

Daily digest market movers: The US Dollar is lacking momentum ahead of key releases

• Eurozone Consumer Prices Index (CPI) data for October has revealed higher-than-expected inflationary pressures, following a positive surprise in the Q3 GDP. These data dampen hopes of aggressive interest-rate cuts by the ECB, supporting the Euro (EUR).
   
• The Bank of Japan (BoJ) kept interest rates unchanged on Thursday but Governor Kazuo Ueda signaled further monetary normalization if conditions are met. This has given some oxygen to a battered Japanese Yen (JPY), adding pressure to the USD.
   
• The US ADP Employment showed a 233K increase in private-sector payrolls in October, well above the 115K expected. September's reading was revised up to 159K from 143K.
   
• Q3 US Gross Domestic Product data, also released on Wednesday, missed estimates with a 2.8% annualized growth. The figures fell short of the 3% expected but they are still consistent with a solid economy.
   
• Wednesday’s data bolstered the case for gradual easing by the Federal Reserve (Fed) but did not add anything new to significantly alter the outlook about the future path of interest rates. The immediate positive impact on the Dollar faded shortly afterward.
   
• The Personal Consumption Expenditures (PCE) Price Index, the Fed’s inflation data of choice, is expected to show that price pressures continued to ease, with the core reading down to 2.6% yearly from 2.7% in September. The data will be published at 12:30 GMT.
   
• The main attraction will be Friday’s Nonfarm Payrolls (NFP) report, which is expected to show a significant decline in new payrolls. If these figures are confirmed, the US Dollar could correct further. 

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