By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The dollar edged higher in quiet trade, but strategists said the lull may soon come to an end as traders get ready to digest a flood of U.S. economic data on Thursday, followed by Friday’s all-important nonfarm payrolls data and next week’s presidential election.
The ICE dollar index DXY -0.01% , which measures the currency against a basket of six major rivals, traded at 80.040 in recent action, up from 79.903 in North American trade late Wednesday.
The WSJ Dollar Index XX:BUXX +0.06% , which measures against a slightly wider basket, rose to 70.05 from Wednesday’s close of 69.94.
“Currency volatility will increase in coming days, with a lot of tier 1 economic data to be released and then the U.S. presidential election next Tuesday,” wrote strategists at FxPro in London. “Rather than looking for a trend to emerge in the dollar, the best approach may be to stay opportunistic and fleet-footed in response to news.”
Nine separate pieces of economic data are set for release Thursday, with the Institute for Supply Management’s survey of U.S. manufacturers and weekly jobless claims data likely to attract the most attention. See: How to handle Thursday's avalanche of data .
Payroll-processing firm ADP will release its October estimate of private-sector payroll activity using a new method that was unveiled last week. The October data is likely to be treated with caution until investors and economists get a grip on the reliability of the firm’s new method.
The ADP employment report will be released at 8:15 a.m. Eastern. Data on weekly jobless claims for the week ended Oct. 27 is due at 8:30 a.m. Eastern, while the ISM manufacturing gauge is set for release at 10 a.m.
Traders will view the data through the prism of whether it makes it more or less likely the Federal Reserve will move to add yet more liquidity to the financial system at its December meeting, said Thu Lan Nguyen, currency strategist at Commerzbank, in a note.
“Disappointing data is likely to cause speculation about an increase of [quantitative easing] towards year-end, thus putting pressure on [the dollar] while surprisingly positive results reduce this likelihood,” although most market participants will likely want to see the October payrolls data on Friday before making a strong commitment, she said.
“As a result major price moves seem unlikely today, with [the euro/U.S. dollar pair] likely to remain in its comfort zone. At the lower end, $1.28 continues to offer good support while $1.3150 constitutes the main obstacle on the upside,” she said.
The euro EURUSD -0.01% traded at $1.2934, down from $1.2962.
Overall activity across Europe was light, with much of the Continent on holiday for All Saints Day.
The Australian dollar AUDUSD +0.02% , which is widely viewed as a proxy for Chinese growth, rose briefly versus the U.S. unit after two separate Chinese manufacturing surveys showed signs of economic recovery. See: China PMI surveys point to ongoing recovery .
The Aussie was up 0.1% in recent action at $1.0376.
The British pound GBPUSD +0.16% changed hands at $1.6168, up from $1.6134.
Sterling was relatively unfazed by a further drop in the U.K. manufacturing purchasing managers’ index in October, which indicated the sector’s contraction accelerated last month. See: U.K. manufacturing contraction deepens: PMI .
Strategists said merger-and-acquisition activity was a positive for the pound Thursday morning. China’s sovereign wealth fund, China Investment Corp., said it bought a 10% stake in the holding company that controls London’s Heathrow Airport. See: China’s CIC buys 10% stake in Heathrow Airport .
The dollar bought 80.01 Japanese yen USDJPY +0.33% , up from ÂĄ79.74.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
