The US Dollar Index (DXY) appreciated 0.33% to start the new working week, the catalyst for the move upwards was stronger than expected US wage growth as well as fresh new threats from President Trump on Chinese imports. Market sentiment decidedly shifted towards safe-haven currencies which saw the Greenback strengthen further than it already has this year.
The US Non-Farm Payroll report released on the previous Friday surprised markets adding 201,000 new jobs in August, beating expectations of 191,000. Also, average hourly earnings rose 0.4% month-on-month and by 2.9% year-on-year, which was the highest wage growth print in almost a decade supporting the Fed’s assertion that the tight labor market would lead to higher wages and price inflation. The implications were not lost on the market which saw US treasury yields move sharply higher as well as boosting expectations of the Fed tightening monetary policy further. The Dollar also benefited from the sentiment, rising higher on the news against most of its counterparts.
New threats from the President also boosted demand for the Greenback despite not announcing the $200bn tariffs on Chinese imports. President Trump did say that it could happen “very soon” but so far, the duties have not yet been implemented. It was another ratchet up of the rhetoric that saw the USD appreciate further with his statement suggesting he was considering putting higher tariffs on all Chinese goods, leading to negative sentiment on market movements. The news hit riskier assets the most and saw steep depreciation for many China aligned currencies.
On the data front, some disappointing data releases put downward pressure on the USD, with PPI and CPI both missing the mark. CPI data came in at 0.2%, missing expectations of 0.3% and unemployment claims also printed at 204K versus expectations of 210K. The US Dollar Index (DXY) dropped touching the 94.43 mark. Core retail sales also printed worse than expected at 0.3%; the forecast was for 0.5%. The only positive side on the economic calendar was from UoM Consumer Sentiment which printed better than expected at 100.8 versus forecast of 96.7.