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Job losses threaten US dollar

USD - United States Dollar

Despite a grim jobs report, in which US employers let go 140,000 workers, equity markets reached record highs this morning and demand for the US dollar fell.

Economists forecasted a small gain of about 60,000 new jobs, and instead non-farm payrolls declined. The unemployment rate remained relatively unchanged at 6.7%. Many expected November’s economic slowdown to have an impact, as well as the third COVID-19 wave. Lockdowns and restrictions have hampered growth.

When the actual employment change is less than the economists’ forecasts, it’s not good for the currency. USD has failed to gain any momentum in the new year. Equity markets have attracted investment, while the euro and Great British pound have strengthened as Brexit concluded.

Key Movers

German industrial production figures added hopes that the country will avoid a double dip recession. Industrial production is a crucial facet of economic output in the country and has shrunk by 2.6% for the year. The euro is struggling in the last 24 hours despite this but perhaps Germany's forthcoming GDP estimate could stem the loses.

It was another mixed day for the pound yesterday as it continued it lost its luster following the Brexit trade deal. Sterling hasn't found the legs to break above GBPUSD 1.365 let alone make another go at GBPUSD 1.37. So, what is weighing on the currency now? Ultimately there is more and more fervor about the Bank of England cutting interest rates to below zero, particularly with the fresh lockdown the UK is now in.

The Australian dollar edged off recent highs Thursday, slipping back below 0.78 US cents amid a broader US dollar rebound. Having touched highs at 0.7820, the AUD was forced back below 0.7750, toward intraday lows at 0.7730, as the US dollar found support amid an uptick in treasury yields and optimism democrat-led stimulus measures that will help lead an economic rebound throughout 2021. Having broken above 0.78, the door is now open for a move toward 0.80.

Expected Ranges

EUR/USD: 1.221 - 1.228 ▲

GBP/USD: 1.354 - 1.362 ▲

AUD/USD: 0.773 - 0.779 ▲

USD/CAD: 1.266 - 1.273 ▲