The U.S. dollar nudged higher on Wednesday as fragile global sentiment continued to support safe-haven flows, though the currency’s advance was contained with markets awaiting Thursday’s rescheduled U.S. employment report.
By 04:15 ET (09:15 GMT), the Dollar Index — which measures the greenback against six major peers — was up 0.1% at 99.552, close to a one-week peak.
Risk aversion underpins the dollar
Equity markets worldwide have come under pressure this week amid renewed anxiety about lofty valuations in AI-linked tech stocks. This shift toward risk aversion has funneled investors into U.S. Treasuries, lifting the dollar.
Nvidia (NASDAQ:NVDA) remains the key focus for traders, with the chipmaker’s earnings release after the close expected to have an outsized impact on sentiment, given its central role in the AI boom.
Analysts at ING warned of the fragility of the current setup, noting: “The magnificent seven tech stocks are around 7% off their highs – a drop in the ocean compared to the 70% rally since April. But the understandable fear is that this is a very crowded trade and that a casual walk to the exit could turn into something less orderly should cause be found.”
Concerns about the economic outlook have added to caution. Jobless-benefit data released Tuesday showed a sharp increase in continuing claims between mid-September and mid-October.
The delayed September nonfarm payrolls report — pushed back because of last month’s U.S. government shutdown — will be released Thursday. Markets are looking for clues on employment strength and wage growth. A soft print would likely boost bets on a Federal Reserve rate cut.
ING said: “Tomorrow’s release of the delayed September jobs report will probably be the best chance for the dollar to go lower this week. Should the jobs data fail to swing the market towards a Fed cut in December (currently 50% priced), then pressure remains on equity markets.”
Pound dips after inflation cools
In Europe, EUR/USD slipped to 1.1577, near a one-week low. The eurozone’s final October CPI reading is expected later in the day, with a slight easing in inflation likely reinforcing expectations for the ECB to hold rates steady next month.
ING added: “Expect continued narrow ranges for EUR/USD, but a move sub 1.1560/65 could cause some intraday trouble.”
GBP/USD weakened 0.1% to 1.3136 after UK inflation slowed to 3.6% in October from 3.8%, raising the probability of a Bank of England rate cut in December.
ING noted: “We expect sterling to remain fragile heading into the Budget.”
Finance minister Rachel Reeves is expected to outline tens of billions in measures at the Nov. 26 Budget to meet fiscal targets.
Yen trades near nine-month low
In Asia, USD/JPY ticked up 0.1% to 155.67, after touching a nine-month high on Tuesday. Long-term Japanese government bond yields have surged to levels not seen in decades as doubts grow about the sustainability of Japan’s expansionary fiscal stance.
USD/CNY firmed slightly to 7.1098, while AUD/USD fell 0.4% to 0.6483 even as wage growth in Australia held steady in the third quarter — reinforcing expectations the RBA will keep interest rates unchanged.
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