Home Daily Commentaries The US dollar is boosted by strong employment numbers

The US dollar is boosted by strong employment numbers

Daily Currency Update

The US dollar index lost around 0.5 percent in yesterday’s session following a big miss on ISM manufacturing, which came in at 54.1 versus 57.5. The ISM and Apple’s revenue guidance weighed on the US dollar. At this moment, the market is pricing slight Fed rate cuts for this year, something that we have not seen in a while. Little attention was paid to the stronger than expected ADP print yesterday, which came in at 271k versus the forecast of 180k, as employment is seen as a lagging indicator.

However, the US dollar started increasing 0.15 percent this morning when worries over China-U.S. trade tensions appeared to ease on confirmation that the vice ministers from the two countries are preparing to hold talks starting on Monday. The Asian nation’s cut to the amount of cash banks have to keep in reserve further boosted sentiment.

The US dollar is getting further help from economic data this morning. The non-farm employment change came in at 312k versus the forecast of 179k, a robust number; however, the unemployment rate came in at 3.9 percent, slightly higher than the read of 3.7 percent.

Key Movers

The Loonie had another excellent day yesterday, which was pushed by the recovery in oil prices from the beginning of 2019. Oil rose, supported by a Reuters survey that showed that the Organization of the Petroleum Exporting Countries cut output in December. The USD/CAD pair moved lower around 0.4 percent in yesterday’s session.

On the economic release side this morning, the Canadian economy created 9.3 k jobs in December and the unemployment rate came in at 5.6 percent versus the expected number of 5.7 percent. At the time of this writing, the USD/CAD pair is trading at 1.3432, 0.42 percent lower. Equity futures pointed to a higher opening for Canada’s main stock index on Friday morning.

On a different note, Canada said on Thursday that 13 of its citizens had been detained in China since Huawei Technologies Chief Financial Officer Meng Wanzhou was arrested last month in Vancouver at the request of the United States.

Yesterday, the European Commission announced that now recent Brexit talks were planned and that the deal that is currently being considered is the best and only deal available. No change there then. Elsewhere from Brexit, it was a relatively quiet day for the Euro. The EUR/USD pair is trading lower this morning at 1.1364 after strong employment numbers in the US.

What we can learn from the first few trading days of 2019 is that Sterling is not sure of its footing at the moment with yesterday’s performance erasing most of the losses seen the day before. At the moment, it would appear that Sterling bulls and bears are evenly matched, but any update out of the UK government could quickly change things. MPs are beginning to trickle back to Westminster so expect next week to see the rhetoric ramp back up.

Construction PMI slipped back yesterday although their impact is minimal compared to today’s Services data for December. The month before, services output hit its lowest level since the referendum, suggesting growth came to a halt during the month. The GBP/USD pair is trading flat at 1.2643.

The Aussie dollar managed to stem its losses seen earlier in the week off the back of China uncertainty. Indeed, Chinese stock markets have bounced back from their steep losses. The Aussie dollar is often seen as a proxy for the sentiment around China. At this moment, the AUD/USD pair is trading 0.4 percent higher at 0.7040.

The New Zealand dollar followed the Aussie dollar. Both are recovering some of their losses against the US dollar overnight following the bounce back in Chinese markets. Moving into the weekend, there isn’t much for the New Zealand dollar to trade on and the rest of January looks a little light data-wise. The NZD/USD pair is trading flat at 0.6684 this morning.

Expected Ranges

  • USD/CAD: 1.3400 - 1.3495 ▼
  • EUR/USD: 1.1300 - 1.1381 ▼
  • GBP/USD: 1.2607 - 1.2660 ▼
  • AUD/USD: 0.7015 - 0.7077 ▲
  • NZD/USD: 0.6651 - 0.6715 ▼