The US dollar continued on overall bearish momentum, as disappointing Factory Orders data allowed greenback bears to push the currency lower ahead of tomorrow’s critical Non-Farm Payrolls report. Volume was reportedly light on the day, with few speculators willing to establish large positions ahead of the market-moving employment figures. Yet gains in global equity indices nonetheless allowed traders to send the dollar lower against higher-yielding counterparts, leaving hopes for a short-term rebound in the carry trade.

The Euro saw its first gain in three days, adding a modest 25 points off of yesterday’s close to $1.3691. British pound bulls likewise enjoyed a small bounce, with the currency up 34 points to $2.0355. The low-yielding Japanese Yen was the only major currency to dip against the greenback, as the dollar added ¥0.31 to ¥119.22 through time of writing.

Morning economic data showed that Initial Jobless Claims rose less than expected in the week ending July 28, suggesting that there indeed remains risk to the topside for tomorrow’s Non Farm Payrolls report. The relatively second-tier economic report failed to move markets, but it does imply that fears over the domestic labor market may be overdone. Recent ADP Employment change data sparked worries that official Bureau of Labor Statistics figures would show significantly lower jobs growth in July. Yet a 4-week average Initial Jobless Claims of 305,500 represents the lowest total of new unemployment claims since May—when the economy added an above-trend 190,000 jobs. Based on this alone, we could expect tomorrow’s NFP’s to come in strongly above consensus forecasts of 127K. Of course, conflicting reports make outlook significantly less clear and create a sure recipe for volatility regardless of the outcome.

Later morning data showed that Factory Orders gained less than expected through the month of June. The headline print showed the fastest pace of growth March, but additional orders were largely due to a jump in aircraft demand. The Ex-Transportation index actually dipped 0.5 percent through the same period, while transportation surged 7.1 percent. Shipments likewise dipped in June at a 0.6 percent decline and inventories added 0.3 percent. The Inventory to Shipments ratio subsequently worsened to 1.25, matching March levels and indicating that growth in supply is outweighing demand for factory production. The report was net bearish for outlook on domestic industry, as aircraft demand cannot single-handedly sustain capital expenditures in the world's largest economy. Currency markets used the opportunity to re-enter profitable dollar short positions, pulling the trade-weighted Dollar Index to weekly lows.

Stock markets moved modestly higher on the day’s trade, with positive earnings reports lending a bid to broad corporate shares. The Dow Jones Industrial Average inched 35 basis points higher to 13,409.27—its highest since Tuesday’s pronounced tumble. Tech stocks led the advances as the NASDAQ Composite rallied 0.5 percent to 2,567, while the S&P 500 remained nearly flat at +1.13 points to 1,466.94.

Fixed income markets temporarily broke their strong correlation with domestic equity indices, with the benchmark 10-Year Treasury Note up 7/32 points to 97 and 31/32. Yields dipped 3 basis points to multi-month lows at 4.76 percent.

John Kicklighter is a Currency Strategist at FXCM.