The US dollar gained momentum on Friday, as another solid month of job creation gave the Federal Reserve the necessary scope it needs to begin raising interest rates as soon as September.
The dollar index, a weighted average of the greenback against a basket of global currencies, climbed 0.4% to 98.25 in the early New York session. With the increase, the dollar index is on pace for a weekly gain of around 1%.
The dollar rallied after the Department of Labor said the US economy added 215,000 new jobs in July, following an upwardly revised 231,000 the previous month that was originally reported as 223,000. Job growth was also revised up by 6,000 to 260,000 in May, official data showed.
The unemployment rate held steady at 5.3%, as expected. Average hourly earnings were also in line with forecasts, rising 0.2%.
Although the July increase was smaller than forecast, it likely gives the Federal Reserve enough scope to begin raising interest rates in September. The Fed’s August rate statement suggested the US economy was expanding “moderately,” but said the labour market had improved considerably since the start of the year.
The dollar advanced against the euro on Friday, with the EUR/USD exchange rate falling 0.4% to 1.0883. The pair is likely supported at 1.0873, followed by 1.0848. On the upside, immediate resistance is likely found at 1.0950, followed by 1.0990.
In Eurozone data, Germany’s trade surplus widened more than expected in June, as imports declined unexpectedly. The trade surplus for Europe’s largest economy expanded to €24 billion from €19.5 billion.
Separately, German industrial production declined 1.4% in June after rising 0.2% the previous month. Economists forecast a June increase of 0.4%.
The dollar also moved higher against the British pound, with the GBP/USD falling 0.2% to 1.5483. The pair faces immediate support at 1.5466. On the upside, initial resistance is likely seen at 1.5552.
The Office for National Statistics reported on Friday that the UK’s trade deficit shrank in the second quarter to its lowest level in four years, driven by an unexpected rise in exports. The UK’s total trade deficit in goods and services fell to £2.7 billion in the second quarter from £4.8 billion, official data showed.
Meanwhile, the USD/CAD continued to test new 11-year highs on Friday. The North American pair climbed to a session high of 1.3184.
The Canadian dollar, like other export-driven currencies, is being weighed by plunging oil prices. US crude futures tumbled on Thursday to their lowest level in nearly six years, as concerns about the global oil glut intensified.
West Texas Intermediate for September delivery continued lower on Friday, declining 20 cents to $44.46 a barrel. International benchmark Brent crude fell 29 cents to $49.23 a barrel.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.