Strong U.S. Jobs Data Failed To Lift Dollar Last Week

Data from the U.S. showing a larger-than-expected addition to non-farm payrolls and an unexpected decline in unemployment failed to sustain the Dollar’s gains during the week ended April 5. The U.S. Dollar slipped against the euro, the British pound as well as the Australian Dollar, but gained against the Japanese yen.

Despite rising to an almost 5-month high, the Dollar Index (DXY), a measure of the Dollar’s strength against a basket of 6 currencies, slipped 0.19 percent during the week spanning April 1 to 5. The DXY which had closed at 104.49 on the last Friday of March, finish trading at 104.29 on the first Friday of April. The index traded between a high of 105.10 and a low of 103.92 during the week.

During the week, the Fed Chair Jerome Powell reiterated that the Fed needed to have greater confidence that inflation was moving sustainably down to its 2 percent target. A larger-than-expected rebound in the ISM Manufacturing PMI and a better-than-expected increase in the number of job openings also helped lift the U.S. Dollar. The decrease in the ISM Services PMI to 51.4 in March from 52.6 in February, way below forecasts of 52.7, however helped kindle rate cut hopes.

Nevertheless, the stronger-than-expected jobs data released on Friday morning failed to support the Dollar’s climb in the day’s trading. Data released by the U.S. Bureau of Labor statistics on Friday showed an addition of 303 thousand to non-farm payrolls during the month of March. This sharply exceeded market expectation of 200 thousand and the previous reading of 270 thousand. The unexpected dip in the unemployment rate to 3.8 percent from the previous month’s two-year high of 3.9 percent also added to the perception of reduced headroom for the Fed to ease rates.

The Euro surged 0.39 percent against the Dollar during the week ended April 5. The EUR/USD pair rose to 1.0835, from 1.0793 a week earlier. The pair ranged between $1.0724 and $1.0877 during the week. Data released during the week had showed annual consumer price inflation in March in the region declining to 2.4 percent versus market expectations of 2.6 percent.

The pound sterling edged up against the dollar despite firm rate cuts hints from the Bank of England and waning rate cut expectations from the Federal Reserve. The sterling, which had closed at $1.2623 rose 0.103 percent during the week to close at $1.2636. The GBP/USD pair traded between a low of 1.2538 and a high of 1.2685.

The Aussie jumped against the U.S. Dollar during the week ended April 5. The AUD/USD pair traded between a low of 0.6480 and a high of 0.6621. The addition during the week was 0.87 percent from 0.6521 on March 29 to 0.6578 on April 5. Minutes of the Reserve Bank of Australia released during the week had shown that the central bank did not consider the case for raising interest rates.

The yen however slipped against the U.S. Dollar during the week spanning April 1 to 5. The USD/JPY pair which had closed at 151.31 on March 29, increased to 151.61 in a week’s time. The pair ranged between 151.96 and 150.81 in a week that saw repeated intervention warnings as well as interest rate divergence with the Dollar.

Fed rate cut possibility continues to be the dominant theme for currency markets worldwide. Amidst recent indications of a strong labor market in the U.S, market focus has now shifted to the consumer price and producer price inflation updates due from the U.S. as well as the keenly anticipated release of the FOMC minutes.

GDP update from the U.K. as well as the interest rate decision by the ECB due in the week are also swaying market sentiment. Amidst the market influences, the Dollar Index has decreased to 104.22. The EUR/USD pair is at 1.0845 whereas the GBP/USD pair is flat near 1.2636. The AUD/USD pair has increased to 0.66. The yen’s weakness has lifted the USD/JPY pair to 151.81.