Dollar falls following payroll data
Friday 10 March, 2023
Daily Currency UpdateThe dollar index (DXY) ends the week by falling below 104.6660. Meanwhile, today's nonfarm payroll data points towards easing inflationary pressures, causing the yields on treasures to fall. This has led to bearish pressure on the US dollar. Nonfarm payrolls, published by the US Bureau of Labor Statistics, increased by 311,000 surpassing the market expectation of 205,000. Looking further into the report, the labor force participation rate showed a modest improvement of 62.5% in February from the previous 62.4% in January. The average hourly earnings for all private sector workers increased by 0.2% last month, compared to 0.3% in January. This results in a year-on-year figure of 4.6%. With today's release of payroll data, the probability of a 50 basis point rate hike in the next Federal Open Market Committee (FOMC) meeting fell from 77% to 40% according to the CME Group Fed-watch tool. Earlier this week FOMC Chairman, Jerome Powell, commented that any further increase in rates would be data-dependent, but with the improvement in the unemployment rate and labor force participation, an increase in the policy rate by 25 basis points is likely this month.
Key MoversEUR/USD surges with a rise above 1.05960. The EUR was trading stronger against the USD on Friday as the euro was boosted by the release of German Consumer Purchasing Managers’ (CPI) data. Year-over-year CPI for Germany came in at 8.7%, in line with analyst forecasts. These figures emphasize ongoing concerns regarding the heightened and stubborn nature of inflationary pressures in Germany. As the largest economy in the eurozone, today's inflation data for Germany will be a proxy for the rest of the region and further add to the European Central Bank's (ECB) hawkish sentiments toward rates. ECB President, Christine Lagarde, will be speaking later today. GBP/USD rises to push above 1.20000. Data released today showed the economy in the UK has rebounded modestly after falling in the last month. UK GDP came in at 0.3% in January from the previous month's negative 0.5%, beating analyst expectations of 0.1%. Additional data released today showed UK industrial production fell in January, with manufacturing output leading the decrease. USD/CAD was under heavy selling pressure as it dropped below 1.37870. Both strong employment data for Canada and broad-based weakness in the US dollar have led to bearish sentiments towards the currency pair. Data released today showed there were 21,800 jobs added in February, beating the expected 10,000 forecasted by analysts. The unemployment rate remained steady at 5% from the previous month and was better than the markets expected, 5.1%. The average hourly wage for permanent employees rose by 5.4% in February from the previous month's 4.5%. Earlier this week the Bank of Canada (BoC) stated that it would pause raising rates, however, today's data shows the labor market is not in-line with the BoC's plans for the economy. This is likely to put pressure on the central bank to reconsider its current stance on interest rates.
- EUR/USD: 1.0568 - 1.0693 ▲
- GBP/USD: 1.1908 - 1.2106 ▲
- AUD/USD: 0.6571 - 0.6633 ▲
- USD/CAD: 1.3754 - 1.3861 ▼