Lower than expected US jobs data weighed on the dollar

A US one-dollar banknote is seen in front of a stock graph displayed in this illustration taken on May 7, 2021.  - Reuters
A US one-dollar banknote is seen in front of a stock graph displayed in this illustration taken on May 7, 2021. – Reuters

The US dollar declined on Friday after data showed the country’s job growth came in lower than expected for the month of June.

The greenback edged lower after the jobs data, but it is still strong enough that the Federal Reserve could resume raising interest rates later this month, as it has indicated. reuters informed of.

Non-farm payrolls increased by 209,000 jobs last month, according to the Labor Department, well below the 225,000 polled by economists. reuters It was predictable. The unemployment rate fell to 3.6% from 3.7% in May, as expected.

The dollar index fell 0.213% to 102.860.

bond whipsaw

Government bond markets declined today as official US jobs data suggested a strong labor market was waning, in a move that appeared to contradict other employment reports.

A sell-off in bond markets intensified on Thursday after strong partial data from the US labor market showed on Friday official US non-farm payrolls showed employers added 209,000 new hires in June, less than forecast, and 339,000 in May. Is.

That signals the jobs market is headed in a different direction than outlined on Thursday’s ADP private employment report, which showed US payrolls rose by 497,000 last month, shocking expectations for a 228,000 increase. Put.

The two-year Treasury yield, which tracks interest rate expectations, fell 7 basis points to 4.93% shortly after the nonfarm report. Two-year yields rose above 5% at the start of the session on hopes that the tight labor market would influence the Federal Reserve to raise interest rates.

Ten-year Treasury yield, which had risen over 17 bps in two sessions, eased 2 bps to 4.022%. Bond yields go down when prices go up.

A selloff in European bond markets, which was heavy this week to reflect US moves, also reversed.

Germany’s two-year bond yield fell 6 bps to 3.298%, hitting a 15-year high on Thursday.

Very early

In the UK, where traders are bracing for a recession and interest rates heading towards 6.5%, two-year gilt yields fell 8 bps to 5.42%, down from their highest since 2008.

However, the US unemployment rate fell to 3.6% from 3.7% last month, prompting some investors to caution that it was still too early to bet on a sluggish labor market, prompting the Fed to reduce its funds rate from its current level of 5%. Had to do 3.6%. 5.25%.

“It’s surprising how strong the labor markets are,” said Neil Birrell, chief investment officer at London-based asset manager Premier Mitton.

And while many investors began 2023 with the bet that stock markets will fall and safe-haven bonds will shine as the recession takes hold and central banks respond with rate cuts, that outlook remains uncertain, Birrell said. Said.

“Can there be a recession without unemployment rising? Theoretically the answer should be no.”

In equity markets, MSCI’s broad gauge of world shares was flat ahead of the US cash markets opening for trade. The index was on course to end the week down 1.4%.

S&P 500 futures were flat while Nasdaq futures were also flat.

The dollar index, which measures the US currency against major competitors, declined 0.3%, ending the week almost unchanged at 102.77.

The euro was down 0.2% this week at $1.0890. On Friday, the yen fell 0.8% to $143.00.

In the commodity, Brent crude futures were steady at $76.48 per barrel. Gold rose 0.6% to $1,922.49 an ounce.

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