USD steadies ahead of payrolls - Scotiabank

The US Dollar (USD) is heading into the end of the week with moderate but broad bid under it. Signs of a thaw in US/China relations helped stem pressure on the USD yesterday following the release of higher than expected weekly claims and a sharp drop in US productivity data and the USD has progressed a little more into this morning's key data reports, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD steadies as signs of US/China trade thaw offset macro worries

"The overall downtrend remains intact and the USD has a lot of work to do in order to display any real strength. But the signs of a moderation in overall bearishness are there (via a steady reduction in the premium for dollar puts over calls reflected in risk reversal pricing, for example). It might not last. The NFP report is the key number for markets this morning. The street is looking for a 125k gain in jobs, weaker than April's 177k rise (Scotia above the market at +180k). Traders are thinking the data will be weaker."

"The Bloomberg 'whisper' number has slipped to 110k from around 138k at the start of the week, with the soft ADP number weighing on expectations. A sub-100k outcome will likely renew USD headwinds whereas a print at or near Scotia's estimate would provide a little--but likely not too much--relief for the USD. With broader market sentiment still quite fragile, a new front of worry has opened up between President Trump and Elon Musk."

"Yesterday's social media fisticuffs are one thing but Musk could muster support against the president's tax bill, adding to broader market uncertainty while further pressure on TSLA after yesterday's 14% drop in what is a very expensive (141 P/E) stock may curb tech risk appetite. Short-term price signals indicate better demand emerged around yesterday's intraday low for the DXY, which may signal a short-term low in place and the risk of a push back towards the 99.50/00 area before renewed selling pressure emerges."