Low Volatility at Month-End, Dollar Falls As Attention Shifts to US Economy

Forex markets are mostly in a tight range today, with little reaction to better-than-expected US employment and Canadian GDP data. There was little movement after the comments from the ECB President and the Chief Economist of the Bank of England. Weak trading at the end of the month keeps volatility very low. However, we hope October kicks off with some decisive steps when such important data as the US ISM and off-farm payroll are presented.

The dollar and yen are recovering in the Asian session, but it is not yet clear if the pullback will end this week. There was no reaction to the presidential debate between Donald Trump and Joe Biden. Asian markets are mixed despite some robust data from China. Dow futures are now down about -200 points, but they are still far from it.

For now, the focus will be on economic data, starting with ADP employment today, ISM manufacturing tomorrow, and then the big non-farm jobs event on Friday.

The US ADP report showed an increase in the number of jobs in the private sector by 749 thousand. In September, higher than expected at 650 thousand. By the size of companies, small enterprises added 192 thousand, Medium – 259 thousand, Large – 297 thousand. By sector of jobs in the production of goods increased by 196 thousand, in the service sector – by 552 thousand.

“The labor market continues to gradually recover,” said Ahu Yildirmaz, vice president and co-director of the ADP Research Institute. “In September, most sectors and company sizes showed growth in trade, transportation and utilities; and production ahead. However, small businesses continued to show slower growth.”
Dollar Falls on Risk-Related Sentiment
In financial markets, risk sentiment led the way as the dollar fluctuated between gains and losses. Risk appetite skyrocketed in America this afternoon amid renewed hopes for a U.S. coronavirus relief package, and while Senator McConnell said Republicans and Democrats are far from fighting the virus, sentiment remained optimistic. Ahead of the closure, Finance Minister Mnuchin announced there was no deal yet.

The US dollar lost ground against most of its major rivals amid improving sentiment. However, the EUR/USD pair closed down around 1.1720. The pound/dollar pair rose despite growing concerns over the latest coronavirus outbreak in the UK.