Dollar dips as jobs growth disappoints before Powell speech

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By Karen Brettell

NEW YORK (Reuters) - The dollar slipped on Wednesday as an estimate of jobs gains in November missed expectations before a highly anticipated speech by Federal Reserve Chairman Jerome Powell.

The dollar index added to earlier losses after the ADP National Employment report showed that U.S. private payrolls increased far less than expected in November, suggesting demand for labor was cooling amid high interest rates.

It briefly pared some losses, however, after data showed that the U.S. economy rebounded more strongly than initially thought in the third quarter, with gross domestic product increasing at a 2.9% annualized rate.

"You have the data potentially reaching a turning point, which is celebrated by the market because it reinforces that expectation that the Fed is not only downshifting, but maybe yields are nearing a limited runway in terms of how much more tightening there is to go," said Mazen Issa, senior FX strategist at TD Securities in New York.

Investors are focused on whether Powell will give any new indications that the U.S. central bank may be nearing the end of its tightening cycle when he speaks on Wednesday afternoon.

The dollar index has fallen to 106.39 from a 20-year high of 114.78 on Sept. 28 and is on track for its biggest monthly loss since September 2010 as investors look toward the U.S. central bank reaching a peak rate early next year.

Powell may push back against the notion that a pivot is coming soon given the uncertainty of future jobs and inflation releases.

Greater divergence between the views of various Fed officials on future monetary policy could also muddy market expectations.

"There’s a little bit more variation in the tone of the Fed from several members so as much as he may come out hawkish. I think the market is going to discount some of that," said Issa.

The U.S. central bank is expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14. Traders are pricing for the fed funds rate to peak at 5.06% in June, from 3.83% now, before falling back to 4.69% by Dec. 2023.

The euro rose 0.51% against the U.S. currency to $1.0381. The greenback gained 0.41% to 139.28 Japanese yen.

Data earlier on Wednesday showed that euro zone inflation eased far more than expected in November, raising hopes that sky-high price growth is now past its peak and bolstering, if not outright sealing the case for a slowdown in European Central Bank rate hikes next month.

The Aussie jumped, meanwhile, on hopes that China will ease stringent COVID-19 restrictions which have raised concerns about global growth, with the southern city of Guangzhou becoming the latest to announce an easing of curbs on Wednesday.

The Australian dollar rose 0.57% to $0.6725. The offshore yuan also gained to 7.0760 against the U.S. dollar, the strongest since Nov. 16.

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Currency bid prices at 9:30AM (1430 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 106.3900 106.8600 -0.42% 11.213% +106.9000 +106.2800

Euro/Dollar $1.0381 $1.0328 +0.51% -8.69% +$1.0392 +$1.0319

Dollar/Yen 139.2800 138.7050 +0.41% +20.99% +139.4500 +138.3350

Euro/Yen 144.58 143.26 +0.92% +10.94% +144.6100 +143.1800

Dollar/Swiss 0.9501 0.9542 -0.43% +4.16% +0.9547 +0.9484

Sterling/Dollar $1.2013 $1.1953 +0.50% -11.17% +$1.2029 +$1.1942

Dollar/Canadian 1.3502 1.3581 -0.57% +6.80% +1.3593 +1.3498

Aussie/Dollar $0.6725 $0.6687 +0.57% -7.48% +$0.6741 +$0.6671

Euro/Swiss 0.9864 0.9850 +0.14% -4.87% +0.9873 +0.9835

Euro/Sterling 0.8640 0.8642 -0.02% +2.86% +0.8658 +0.8622

NZ $0.6236 $0.6200 +0.56% -8.90% +$0.6251 +$0.6191

Dollar/Dollar

Dollar/Norway 9.8715 10.0045 -1.31% +12.07% +10.0070 +9.8730

Euro/Norway 10.2422 10.3204 -0.76% +2.29% +10.3528 +10.2520

Dollar/Sweden 10.5353 10.5736 +0.06% +16.83% +10.6027 +10.5145

Euro/Sweden 10.9326 10.9256 +0.06% +6.83% +10.9503 +10.9120