US Dollar extends losses; Eyeing NFP for further direction

The Fed’s surprisingly dovish stance at its policy meeting on March 15-16 kicked-off the overall US Dollar (USD) weakness against its major counterparts. Adding to it was the Federal Reserve Chairwoman Janet Yellen’s dovish signals before the Economic Club of New York on Tuesday. Yellen’s soft bias suggested central bank’s cautious stance towards normalising interest rates.

Yellen’s remarks triggered a strong effect on USD, which got hammered on Tuesday against its key rivals, EUR and GBP. Extending its overnight strength, EUR/USD decisively broke through 1.1300 barrier and GBP/USD surged past 1.4400 mark during the European session.

Wednesday’s key data – ADP report

With no significant data release from the UK economic calendar, currency market participants were awaiting for Wednesday’s major release from the US, ADP report, which shows the number of private-sector jobs addition. According to the report, US private-sector added 200,000 jobs in March. Although the reading is roughly in-line with consensus estimates of 195,000 but reflects slight moderation from February’s revised 205,000.

ADP report is looked upon as an early estimate for official jobs report, popularly known as NFP, and is scheduled for release on Friday.

German CPI

Apart from the ADP report, Wednesday’s German consumer price index (CPI) data supported Euro to hold and extend Tuesday’s up-move against USD. According to the preliminary data on inflation rate in Germany, CPI in March 2016 rose 0.3% on an annualized basis and by 0.8% as compared to February 2016.

Both EUR/USD and GBP/USD remain well anchored above critical levels and seem all set to continue benefiting from Yellen’s dovish comments. However, the ‘Brexit’ fire might restrain Sterling from building on to its recent strong gains. Moreover, Friday’s jobs number would act as a catalyst in determining further near-term direction for USD.