Dollar advances with yields ahead of highly anticipated Nonfarm Payrolls

Stocks, bond yields and the dollar are at elevated levels ahead of July’s US Nonfarm Payrolls report, which carries high expectations. Wages are of interest amid rising inflation and the Fed’s inching toward tapering. Canada’s jobs report is also eyed, GBP/USD is holding up after the BOE, while gold and cryptos are on the back foot.

US stock indexes closed at or around record highs on Thursday amid optimism about US economic growth. The Nonfarm Payrolls report is set to show an increase of 870,000 jobs in July, similar to levels seen in June, but estimates vary more than usual. Leading indicators have been mixed.

The Unemployment Rate is set to fall from 5.9% to 5.7% and wages annual wage growth to advance from 3.6% to 3.8%. Investors are watching salaries more closely after the Federal Reserve Vice-Chair Richard Clarida said he sees inflation risks as being to the upside. He also supports a tapering announcement this year.

The Fed currently buys $120 billion worth of bonds every month and the question of reducing the program tops traders’ agendas. Clarida’s comments and similar remarks from other Fed officials are driving bond yields higher, and that is supporting the dollar. EUR/USD is hovering below 1.1830, around the lows.

GBP/USD is holding up above 1.39 after the Bank of England took baby steps toward tightening its monetary policy, saying it could change “modestly.” However, only one member supported tapering bond buys already now. BOE Governor Andrew Bailey said that he sees current inflation as merely a “hump” but he is worried about secondary effects.

USD/CAD is trading around 1.25 ahead of Canada’s July jobs report. An increase of 177,500 positions is expected as the nation extends its reopening after lockdowns in the spring. The Unemployment Rate is set to drop from 7.8% to 7.4%.

Investors seem more relaxed about China’s crackdown on tech companies, a topic that was of concern earlier in the week. Coronavirus cases are also on the rise in the world’s second-largest economy, with Beijing imposing restrictions. China also said it would release reserves of commodities to ease pressures on prices.

The US Senate will convene on Saturday to continue its debate on the bipartisan infrastructure deal, after attempts to amend it ran into roadblocks. Democrats plan a $3.5 trillion package after the current $1 trillion one.

Gold is trading around $1,800, falling as returns on US Treasuries rose. The precious metal has no yield.

Cryptocurrencies are consolidating their gains, with Bitcoin hovering around $40,000 and Etthereum clinging to $2,800. ETH/USD rose on Thursday as it implemented a technological change.

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