Dollar Underpinned by Positive Jobs Data, Easing of Trade War Tensions

The U.S. Dollar bounced back against a basket of currencies on Wednesday after four days of selling pressure. The dollar was supported by positive private sector jobs data and the White House saying Canada and Mexico, and possibly other countries, may be exempted from planned U.S. import tariffs on steel and aluminum. Traders said this news may be an indication that the Trump Administration is not as serious as suspected about implementing the tariffs.

March U.S. Dollar Index futures settled at 89.607, up 0.017 or +0.02%.

U.S. Economic Data

In the U.S., the ADP Non-Farm Employment Change report came in at 235K, beating the 199K forecast. Last month’s number was revised higher to 244K.

Revised Non-Farm Productivity was 0.0%. Revised Unit Labor Costs were up 2.5%. The U.S. Trade Balance was -$56.6 Billion, higher than the $55.1 Billion forecast. The previous number was revised lower to -$53.9 Billion.

Federal Reserve News

Federal Reserve Bank of Atlanta President Raphael Bostic said a potential trade war is casting doubt over how many times the U.S. central bank will need to raise interest rates this year. He also said it might offset momentum from fiscal stimulus.

Bostic, a leading dove, also said 2 to 4 rate hikes are possible this year and the stock market could be hit by concerns about trade.

Finally, the Federal Reserve Beige Book showed businesses reported persistent labor market tightness across the United States, with accelerating wage gains in many regions. This news supported the case for interest rate increases.

Gold

Gold prices retreated from a one-week high on Wednesday as the dollar recovered and stocks rebounded from a steep sell-off in the pre-market session. Gold was supported earlier in the session after U.S. President Donald Trump said he would push ahead with punitive tariffs on imports, rekindling fears of a potential trade war.

Gold traders began to take profits, triggering the start of an intraday sell-off in response to positive labor market data from ADP and positive comments from the White House saying the administration may be open to exempting Canada and Mexico, and possibly other countries from the planned U.S. import tariffs on steel and aluminum.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil prices closed lower on Wednesday in response to lower demand for risky assets amid concerns that the Trump administration’s plans for import tariffs could spark a trade war, and after a U.S. government supply report showed an increase in crude inventories and output.