Will the Dollar Rise Alongside Rising Tensions with North Korea

With little else for the markets to consider on Tuesday, June’s JOLTs job openings needed to be something special for the Dollar and the numbers were certainly unexpected, with thinner volumes driving the Dollar, as a sense of relief spread across the markets on robust demand for labour, raising hopes of rising wage growth off the back of a shortage of skilled workers.

The numbers are for back in June, but the jump was significantly more than the June and July nonfarm payrolls, supporting sentiment towards demand in the coming months.

Moves through the Asian session have seen the Dollar ultimately flat going into the European session, with sentiment towards the figures mixed ahead of today’s 2^nd quarter productivity and unit labour costs and of course, Friday’s heavily anticipated July inflation numbers.

There’s nothing else for the markets to consider going into the U.S session, with no material stats scheduled for release out of the Eurozone or the UK through the European session to influence before today’s U.S numbers, which will likely weigh on both the pound and the EUR, with both in the red through the Asian session.

We have heard some strong rhetoric from the U.S President on Tuesday and talks of fire and fury will certainly have the markets running for the safe havens as tensions continue to build between the two, with China seemingly siding with the U.S this time around.

Risk appetite will be tested through the day, with the Yen moving to sub-¥110 levels, though as we saw with the JOLTs job openings on Tuesday, how the Dollar moves through the day will hinge on today’s numbers out of the U.S.

There’s an almost desperation by the Dollar bulls to pounce on anything positive ahead of the inflation figures at the end of the week and, while productivity is set to gain in the 2^nd quarter, unit labour costs will need to impress and forecasts suggest otherwise.

Interestingly, we heard from the RBA early in the Asian session this morning and the jawboning has kicked off once more, so the likes of the RBNZ, RBA and ECB will be hoping for some Dollar upside through the week, the continued weakness through the current year leading not only the central banks to reconsider their position on monetary policy, but also the markets.

One thing that no one needs right now is a slowdown in economic growth, particularly when considering how accommodative monetary policy is at present. Trade data out of Germany failed to impress, as was the case with figures out of China, though neither were weak enough to raise any red flags just yet, with year-on-year numbers still upbeat. How the U.S economy performs through the 3^rd quarter, alongside China, will be of particular importance.

At the time of the report, the EUR was down 0.11% at $1.1741, while the pound bucks the trend alongside the Yen, up 0.15% at $1.3012 ahead of tomorrow’s main event. With the Dollar Spot Index down 0.04% at 93.607, the numbers are going to need to be good for a more sustainable upside ahead of Friday, with support for the Dollar likely to be on the softer side, though it could all go horribly wrong if North Korea carries out its preemptive threat on Guam.