Strong Jobs Data Limits Dollar's Losses Amidst Fiscal And Tariff Concerns

(RTTNews) - Data showing an unexpectedly strong payrolls addition curtailed the dollar's losses in a week marked by anxiety about the U.S. fiscal outlook. The week ended July 4 witnessed the U.S. Dollar inter alia slipping against the euro, the Australian dollar, the Japanese yen, the Canadian Dollar and the Swiss franc but gaining against the British pound and the Swedish Krona. Despite anticipation ahead of the much-awaited tariff deadline of July 9 dragging down the greenback, the Dollar Index closed with weekly losses of close to half a percent only as markets priced in a Fed hesitant to cut rates given the strong jobs data.

The Dollar Index (DXY), a measure of the Dollar's strength against a basket of 6 currencies slipped 0.45 percent during the week ended July 4. The DXY which had closed at 97.40 on the last Friday of June, finished trading at 96.96 on the first Friday of July. During the week, the index ranged between the low of 96.38 recorded on Tuesday and the high of 97.42 recorded on Thursday.

Concerns about economic activity in the U.S. eased after the ISM Manufacturing PMI edged up to 49 in June from 48.5 in May, surpassing market forecasts of 48.8. Also, data released by the U.S. Bureau of Labor Statistics on Tuesday showed the number of job openings increasing to 7.769 million in May from an upwardly revised 7.395 million in April and exceeding market expectations of 7.3 million.

In data released on Thursday morning, the U.S. Bureau of Labor Statistics showed an addition of 147 thousand to non-farm payrolls in the month of June, versus 110 thousand that the markets had expected. This compared with the previous month's revised reading of 144 thousand. The unemployment rate which was anticipated to rise to 4.3 percent from 4.2 percent in May unexpectedly decreased to 4.1 percent. The robust jobs data helped the greenback recoup a portion of the losses suffered in the beginning of the week.

The data release on Thursday that followed showed the ISM Services PMI rising to 50.8 in June from 49.9 in May and exceeding forecasts of 50.5.

Amidst the dollar's weakness triggered by fiscal worries and inflationary concerns, the Euro surged 0.50 percent against the Dollar. During the week ended July 4, the EUR/USD pair rose to 1.1779, from 1.1720 a week earlier. The pair ranged between $1.1705 and $1.1831 during the week. Data released during the week had showed annual consumer price inflation in June in the region edging up as expected to 2 percent from 1.9 percent in the previous month.

The week ended July 4 witnessed the pound sterling slipping 0.46 percent against the greenback despite broad dollar weakness. Recent comments by Governor Andrew Bailey of Bank of England that interest rates are still on the downward path weighed on the sterling. The sterling, which had closed at $1.3716 on June 27 dropped to $1.3653 by July 4. The GBP/USD pair traded between a high of 1.3790 and a low of 1.3562 during the week.

The Aussie rallied against the U.S. Dollar during the week ended July 4 amidst anxiety ahead of the interest rate decision by the Reserve Bank of Australia. The AUD/USD pair traded between a low of 0.6522 recorded on Monday and a high of 0.6592 recorded on Tuesday. The gain for the pair during the week was 0.34 percent, from 0.6531 on June 27 to 0.6553 on July 4.

Safe-haven Japanese yen edged up during the week ended July 4 amidst persisting trade tensions. The USD/JPY pair which had closed at 144.67 on June 27, decreased to 144.56 in a week's time. The pair ranged between 142.68 and 145.25.

Amidst the strong jobs data that portended a resilient American economy, the possibility of a Fed rate cut has dwindled. The CME FedWatch tool that tracks the expectations of interest rate traders currently shows expectations of a quarter point rate cut by the Fed in the July FOMC at 4.7 percent. It was 6.2 percent a day ago, 20.7 percent a week earlier and 16.3 percent a month ago.

Also, on the horizon are the release of the FOMC minutes on Wednesday and the inflation updates from the U.S. in the following week. Amidst renewed tariff threats by President Trump, the Dollar Index has increased to 97.56 from 96.96 at close on Friday. The EUR/USD pair is currently at 1.1723 versus 1.1779 at close on Friday. The GBP/USD pair which closed trading at 1.3653 on Friday has declined to 1.3584. The AUD/USD pair is trading at 0.6545 amidst the Reserve Bank of Australia's hawkish pause on interest rates. The dollar's rebound has lifted the USD/JPY pair to 146.57.