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Dollar Index Swings on Strong U.S. Employment Report

dollar swings U.S. employment report

The dollar index swings on a strong U.S. employment report. Asian markets anticipate a mixed impact. Gold prices soar, while oil faces downward pressure.

The latest February U.S. non-farm payrolls (NFP) data surprised, as the economy added 275,000 jobs, exceeding the estimated 198,000. The healthcare, government, food services, social assistance, and transportation sectors primarily experienced the boost. However, despite the positive job figures, the unemployment rate unexpectedly rose from 3.7% to 3.9%, and average hourly earnings saw a modest increase of only 0.1% month-on-month, missing expectations.

The release of the employment report stirred significant volatility in the dollar’s demand. The dollar index (DXY) initially surged to 102.86 before plummeting sharply to 102.36. It eventually regained ground and closed at 102.75 by the end of the trading session.

As Asian markets absorb the implications of the robust U.S. employment data, the DXY opened around 102.75 before sliding to 102.60. At the same time, spot gold prices hovered around $2,180/oz and are expected to remain elevated throughout the day. With no major news events scheduled, trading activity will be relatively subdued as the new week begins.

Dollar Index (DXY) Outlook

Following a decline from nearly hitting 105 in mid-February, the dollar’s demand has diminished, with the DXY shedding 1.9% to dip below 102.50 last Friday. However, the stronger-than-anticipated NFP figures could provide a lift, possibly leading to a higher retracement.

Central Bank Insights

For the fourth consecutive meeting, the Federal Reserve maintained the Federal Funds Rate target range at 5.25% to 5.50%. The Committee continues to prioritize maximum employment and inflation at a rate of 2.0% over the longer term, closely monitoring incoming data and economic outlook for any adjustments.

Dollar Index Swings on Strong U.S. Employment Report

Gold (XAU) Trends

Spot gold prices surged to an all-time high of $2,195/oz before slightly retracting to close around $2,177/oz last Friday. Gold prices are expected to remain steadily upward over the past weeks.

Currency Focus

  • Australian Dollar (AUD): Initial gains in AUD following the NFP data were capped, with the currency drifting lower towards 0.6600 as markets opened.
  • New Zealand Dollar (NZD): NZD experienced volatility post-NFP, erasing gains to trade around 0.6175, potentially facing downward pressure.
  • Japanese Yen (JPY): Significant inflows into JPY caused USD/JPY to drop to 146.50, with downward pressure persisting.
  • Euro (EUR): The EUR rally stalled around the 1.0980 level post-NFP. It is currently trading around 1.0940 and is likely to face continued pressure.
  • Swiss Franc (CHF): CHF weakened against the dollar post-NFP, with USD/CHF rising towards 0.8780 and expected to climb higher.
  • British Pound (GBP): GBP rally faltered around 1.2895-level post-NFP, with the currency trading around 1.2850 and facing pressure.
  • Canadian Dollar (CAD): USD/CAD reversed post-NFP, closing in the green at 1.3495 and potentially rebounding further.

Oil Market Outlook

Crude oil prices faced downward pressure amid concerns over slower global demand, particularly from China. WTI oil closed at around $77.95 per barrel last Friday and continued its downtrend, trading at around $77.40, likely to decline further.

Markets brace for the week ahead, expecting the robust U.S. employment report and other global economic factors to shape trading dynamics across various asset classes.

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