The greenback rose to it’s highest level in two months after a strong ADP payrolls report that highlighted the strength of the U.S. economy.
The report showed that private-sector hiring accelerated last month fueled by the construction, mining and manufacturing sectors. The assumption can therefore be made that Friday’s nonfarm payrolls report will also come in strong. Friday’s report will be the last piece of major data before the Federal Reserve meeting next week.
According to CME Group data, Fed-funds futures now show a 91% chance that the Fed raises rates at the meeting next week. The market is also pricing in a 57.5% chance that rates rise three or more times this year.
The U.S. dollar strength saw all other major currencies fall. Euro fell from 1.0570 to 1.0530, USD/JPY surged from 113.60 to 114.75 while the AUD fell from 0.7609 to 0.7529 a level not seen since January 30. As this rate AUD would be targeting an initial low of 0.7500 followed by a further low of 0.7400 in the next couple of months.
Oil prices saw their biggest one day decline in more than a year after U.S. crude stockpiles hit record levels.
The Energy Information Administration released supply data that showed crude-oil stockpiles rising by 8.2 million barrels in the week ended March 3. This is significantly higher than the 1.7 million barrels that the market was expecting.
Expectation that production cuts by the Organization of the Petroleum Exporting Countries and other exporters would work off the glut of oil have severely diminished. U.S. inventory levels have been on the rise for nine weeks in a row. They hit a record of 528.4 million barrels last week as both imports and U.S. production increased.
WTI futures fell 5.38% or $2.86 to $50.28 a barrel on the New York Mercantile Exchange, a three-month low while Brent, the global benchmark, fell 5.03% or $2.81 to $53.11 a barrel on ICE Futures Europe.
The selloff was the largest single-day percentage decline since February of last year, when prices were spiraling to a 13 year low.
In commodities, Gold for immediate delivery dropped 0.5 percent to $1,210.08 an ounce while copper futures rebounded after a four-day slump. The metal for three-month delivery added 0.6 percent to $5,804 a metric tonne.
