Dollar Remains On The Defensive

The dollar dropped dramatically yesterday and remains under the selling pressure on Friday. The risk-on environment coupled with pound strength and weaker US economic data fuelled a more aggressive sell-off in the buck across the board.

Today, the greenback may get a chance for a recovery. The US NFP employment report could serve as a catalyst for bulls should the jobs and wages come on a stronger side. Traders have been focused on wages data lately as this is one of the inflation indicators. So the increase by 0.2-0.3% could cap the negative pressure on the USD and cement the Fed rate hike expectations as well.

Market participants will also closely monitor the US-China trade war developments after the recent speculations about the prospects for resuming the constructive and healthy dialog between the two countries. Against this backdrop, investors resumed buying riskier assets and if the sentiment continues to improve, dollar safe-haven demand will ease further. So the buck has a chance for a recovery in the short term, while in a wider picture, the currency may stay on the defensive.

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