Trading Currencies: Greenback is Back

A Sign of US Dollar Comeback

Non-Farm Payrolls (NFP) have led an incredible resurgence in the USD over the past two weeks. We had eased our positions in the USD over the past three weeks on momentum and technical indicators suggesting it was overbought. The rapid rise of the Delta variant has further exacerbated the pressure.

But the data has put the USD back on top.

US Added More Jobs Than Expected

July was a strong month for the US. NFP saw an astonishing 943,000 jobs created in July. Analyst expectations were for 870,000 while the June read was revised to 938,000 from 850,000.

A major reason for the surprise was mainly due to a government hiring surge. Private payrolls met consensus, which was 703,000. The leisure and hospitality sector led job creation, followed by education and professional and business services sector.

Lower Unemployment Rate and Higher Salary

The unemployment rate hit 5.4 per cent from 5.9 per cent. Average hourly earnings rose 0.4 per cent meaning the year-on-year pace is now for a 4.0 per cent. Participation rose to 61.7 per cent. The conclusion – this was very strong labour report.

The non-farm productivity rose 2.3 per cent in Q2. Despite the fact that the data missed expectations, it still highlights the continuing productivity acceleration from the economic rebound. The dive in productivity has been created by a sustained exit of low-wage employment and increasing hours-worked by the remaining employment market. This has translated into a 1 per cent rise in labour costs – wage growth. Read the latest market news.

The Greenback is Back

After the news, EUR/USD has fallen from $1.185 to $1.1710 in four days, a four-month low.

USD/JPY hit ¥110.55 a four-week high and up from ¥108.70 in just five days again. Interesting that this hasn’t been driven more by the fall in gold.

AUD/USD bounced off a three-week low of $0.7316 to be back at $0.7350 but since the NFP the pair has lost 1.2 per cent or $0.90 and momentum suggests the year-to-date low of $0.7289 could be under threat. Receive the latest price updates on your favourite USD pairs.

This article is prepared by Lucia Han from Mitrade and is for reference only. We do not represent that the material provided here is accurate, current or complete. The article content neither takes into account your personal investment objects nor your financial situation, and therefore it should not be relied upon as such. You should seek for your own advice.