FX Market View #27 Dollar remains mixed in response to lower US jobs data

The news of last week was how the Dollar would respond to the NFP data being released on Friday. Estimates were pointing towards continued US economic growth, however the market uncertainty resulted in mixed Dollar views ahead of the jobs report. The Scandies lead the way forward for the majors, posting gains against the greenback with the Australian Dollar and Yen lagging behind. As for the Euro, it remained logged in a fairly narrow trading range against the Dollar unable to break from this holding pattern. When the jobs data was release and posted a lower than expected number, the market appeared to absorb this data with little reaction from the Dollar. US interest rates also took it in its stride when the increase in new jobs creation was the lowest so far this year.
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The main reason why the market could look past the disappointing jobs data, is because the figure was high enough to keep in place the Fed plan of reducing its bond purchasing program. As a consequence, it came as no surprise that the Dollar softened in response to the jobs data without concerning the market. Additional factors behind the untroubled Dollar reaction include that fact that the 194K rise in nonfarm payrolls is still subject to higher revisions. Secondly, with US 10-year yields pushing to 3 month highs the Dollar is supported against other currency majors. Therefore, when only evaluating the interest rate differentials between currencies, there is little wonder that funding currencies like the Yen and Franc offer little resistance to the Dollar.
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As it stands at the moment the Dollar views in the near-term appear mixed. Looking at other markets, equities opened the week lower along with soft commodities. Oil and natural gas are still trading at elevated levels, with a bounce in metals as well. Across that financial markets there are few key factors driving market trends. Therefore, market attention is placed on the prospects on how central banks are going to manage potential inflationary pressures. The BOE is maintaining a hawkish view which supports UK rates with the expectation of a hike later this year. Consequently, Sterling traded higher across the board, however unable to consolidate the early gains. With the exception of Canadian Dollar, the majors seem poised to maintain in range bound territories.

FX Multi Core Trade Overview

04.10.21 – 08.10.21

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Total
Total Buy Trades 58
Total Sell Trades 47
Total Trades 105

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