U.S. dollar jumps across the board after strong U.S. jobs report

“I am not a product of my circumstances. I am a product of my decisions.” – Stephen Covey

 

 

HEADLINES

 

 

• U.S. dollar jumps across the board after strong U.S. jobs report
• Gold dips 1% as robust U.S. jobs data eases recession concerns
• Oil prices set to end week near multi-month lows on recession fears
• Wall Street drops as jobs data rekindles rate hike fear
• U.S. 10-year Treasury yield jumps after jobs growth blows past expectations
• GBP/USD could drop to as low as 1.14 on a three months view – Rabobank
• GBPUSD Near Term: Downside favored

 

 

U.S. dollar jumps across the board after strong U.S. jobs report

 

 

The dollar rallied across the board on Friday after a stronger-than-expected U.S. July payrolls report suggested the Federal Reserve may need to continue raising interest rates for the near term.

The U.S. dollar index , which measures the greenback against a basket of currencies, sharply extended gains following the report, which showed nonfarm payrolls increased by 528,000 jobs last month, the largest gain since February. That was well above expectations by economists.

The dollar index, which remains below its mid-July high, was last up 0.9% at 106.63. It was up about 0.2% just before the report.

 

 

COMMODITIES

 

 

Gold dips 1% as robust U.S. jobs data eases recession concerns

 

 

Gold prices extended losses to slide more than 1% on Friday as an unexpectedly strong U.S. jobs report eased recession worries and dashed speculation that the Federal Reserve would pivot away from its aggressive monetary policy tightening.

Spot gold was down 0.9% to $1,775.64 per ounce by 10:41 a.m. (1441 GMT), after falling as much as 1.5% earlier in the day. U.S. gold futures eased 0.7% to $1,794.30.

U.S. employers hired far more workers than expected in July, with the unemployment rate falling to a pre-pandemic low of 3.5%.

 

 

ENERGY

 

 

Oil prices set to end week near multi-month lows on recession fears

 

Oil prices rose on Friday, recouping some of this week's losses on strong U.S. job growth data but remained on course to close the week near their lowest levels since February, rattled by worries a recession could hit fuel demand.

Brent crude rose $1.46, or 1.6%, to $95.58 a barrel by 11:56 a.m. EDT (1556 GMT). U.S. West Texas Intermediate crude was up $1.24, or 1.4%, at $89.78.

U.S. job growth unexpectedly accelerated in July as nonfarm payrolls increased by 528,000 jobs, the largest gain since February, the U.S. Labor Department reported.

Oil traders this week have fretted about inflation, economic growth and demand, but signs of tight supply kept a floor under prices.

 

 

STOCKS

 

 

Wall Street drops as jobs data rekindles rate hike fear

 

 

Wall Street stocks fell on Friday, weighed down by Tesla and other technology-related stocks after a solid jobs report torpedoed recent optimism that the Federal Reserve might let up its aggressive campaign to reign in decades-high inflation.

Data showed U.S. employers hired far more workers than expected in July, the 19th straight month of payrolls expansion, with the unemployment rate falling to a pre-pandemic low of 3.5%.

The report added to recent data painting an upbeat picture of the world's largest economy after it contracted in the first half of the year. That deflated investors' expectations that the Fed might let up in its series of rate hikes aimed at cooling the economy.

 

 

U.S. 10-year Treasury yield jumps after jobs growth blows past expectations

 

 

The 10-year Treasury yield rose to 2.856% on Friday morning on the back of a stronger-than-expected jobs report for July.

The data showed nonfarm payrolls increase 528,000 last month and surpass Dow Jones’ expectations of 258,000. At the same time, wage growth rose with average earnings climbing 0.5% for the month and 5.2% over last year.

Friday’s move marks a reversal from the recent trend, which saw the 10-year yield trending lower on fears the Fed’s hiking campaign was tipping the economy into a recession. Earlier this week, the 10-year yield fell to 2.50% and its lowest since April, according to FactSet.

 

 

ANALYSIS

 

 

GBP/USD could drop to as low as 1.14 on a three months view – Rabobank 

 

 

“The Bank of England’s forecast of recession underpins the vulnerability of the pound going forward. The warnings on growth over-rode any support for the currency that may otherwise have been derived from the Bank’s 50 bps rate hike, the largest incremental move in 27 years. The UK is facing months of astoundingly high inflation levels faced by a period of disinflation during potentially 5 quarters of negative GDP growth. In politics, Liz Truss, the favourite to win the Tory party leadership race, continues her charm offensive aimed at Tory party members who will choose the next UK PM in September. Her policies, however, are not necessarily in line with investors’ needs. We see risk that cable could print as low at 1.14 on a 1 to 3 month view. This assumes a continued period of broad-based USD strength.”

“We recently reined back our 3 mth forecast for EUR/GBP to 0.84 from 0.86. That said, on the assumption that EUR/USD faces another break below parity on a 1 to 3 month view, we see scope for cable to head to 1.14.”

 

 

CHART

 

 

GBPUSD Near Term: Downside favored

 

 

Technical View: Short position below 1.2125. Target 1.197. Conversely, break above 1.2125, to open 1.2175.

Comments: The pair remains under pressure. Further weakness favored.

Source: Trading Central 

 

CALENDAR

 

 

*Times in GMT

Source: FX Street Economic Calendar

Footnotes
https://www.reuters.com/markets/us/dollar-backfoot-ahead-key-us-jobs-data-2022-08-05/
https://www.reuters.com/article/global-precious/precious-gold-dips-1-as-robust-u-s-jobs-data-eases-recession-concerns-idUSL4N2ZH397
https://www.reuters.com/markets/europe/oil-prices-extend-losses-demand-worries-2022-08-05/
https://www.reuters.com/markets/europe/futures-steady-ahead-monthly-jobs-data-2022-08-05/
https://www.cnbc.com/2022/08/05/us-treasury-yields-nonfarm-payrolls-unemployment-fed-recession.html
https://www.fxstreet.com/news/gbp-usd-could-drop-to-as-low-as-114-on-a-three-months-view-rabobank-202208051757