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Disappointing jobs data softens US dollar

USD - United States Dollar

Demand for the US dollar took a tumble after non-farm payrolls data reported only 266,000 jobs added in April. Economists were expecting an increase of 978,000 jobs. The unemployment rate also unexpectedly nudged up to 6.1% from 6%.

The US Dollar Index fell to 90.44 on the news but climbed back steadily to 90.64 at the time of writing. The index, which measures the US dollar against a basket of major currencies, was already tracking lower through trade on Thursday as investors appeared to be consolidating April’s downturn. It fell 0.4% through the overnight session, slipping below the 91 mark.

Despite easing restrictions and a nationwide vaccination program, the disappointing data underscores what could be the labor market’s choppy recovery post-pandemic.

Key Movers

US dollar softness helped the euro climb off lows to 1.212 today, while GBPUSD was a touch higher at 1.393.

On Thursday, UK monetary policy makers voted to leave interest rates unchanged yesterday, while slightly tapering the asset purchasing program. Yesterday’s news caused GBPUSD to dip by 0.4% for a moment before retracting higher on the improved economic outlook. Bank of England Governor Andrew Bailey revised his GDP growth to 7.25% for 2021, which strengthened the pound. Bailey concluded with “We have not yet completed our review into the sequencing of policy tightening” and insisted that the reduction in gilt purchasing was not a tapering decision. It suggests that we will not see a rate hike in the next meeting, however, are more likely than before Thursday’s meet to see one before the end of 2021. This would be sterling positive.

The Australian dollar opened higher this morning, extending toward 0.78 US cents overnight thanks to a broadly weaker US dollar. Having tracked sideways through much of the morning, the AUD fell sharply around midday following reports China’s National Development and Reform Commission had suspended high-level economic dialogue with Australia indefinitely. We expect the AUD will continue to whipsaw between support and resistance, maintaining its narrow handle through the short-term.

Expected Ranges

EUR/USD: 1.204 - 1.213 ▲

GBP/USD: 1.386 - 1.396 ▲

AUD/USD: 0.774 - 0.782 ▲

USD/CAD: 1.214 - 1.221 ▲