US Dollar Remains Flat After Payrolls Data Beats Expectations

On Friday, the US dollar remained flat ahead of the weekend against a basket of major currencies, after ending a choppy trading session. During the day, the greenback posted both losses and gains, after data showed that the largest economy in the world created more jobs in June than had been expected. This strengthened expectations that there would be another hike in the interest rate in this month’s meeting of the US Federal Reserve by 75 basis points.

Jobs data

The data from the Labor Department revealed that US nonfarm payrolls in the previous month added 372,000 jobs. Meanwhile, forecasts had predicted that the increase in jobs would be about 268,000. Early in the trading session, the US dollar had reached a high of two decades against a basket of its peers.

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This was driven by the greenback’s gains against the euro, as there were indications that the economy of the eurozone could tip into recession. This week, the dollar has reached peaks of 2 decades consecutively, as the greenback gained in five out of the last six trading weeks. The US dollar index was trading flat in the afternoon trading session, as it reached a level of 106.96.

Rate hike

After the release of the jobs data, there was a 90% chance priced into the Fed fund futures that the Federal Reserve would hike its interest rate by 75 basis points this month as well. It is expected that the total increase in interest rate by the end of the year would be about 187 basis points. On late Thursday, the expectation had been a hike of 181 basis points.

Market analysts said that the strong US data, especially the higher-than-expected payrolls, along with the hawkish comments by officials of the Federal Open Market Committee (FOMC) had reinforced the divergence between the strong US economy and the gloomy outlook in Europe.

However, there were some economists that said that the headlines suggested that the jobs report was strong, but it really was not the case. They said that the report showed that the global economy was already moving towards slowing growth.

Inflation report in focus

Now that the jobs report is done, investors have switched their focus towards the inflation report due on the coming Wednesday. Forecasts indicate that June will see the consumer price index reach a high of 40 years at 8.8%. However, they show that the monthly core index would come down from May’s value of 6% to 5.8%.

Investors were also keeping an eye on the euro. This week, the single currency has recorded a 3% decline against the US dollar, as investors are concerned about the impact of the energy crisis that is happening due to the Russian gas supply uncertainty. The currency had last climbed by 0.1% to reach $1.0176.

There was a 0.1% gain in the Japanese yen against the greenback, which brought it to 136.07 yen. The currency had seen a brief lift on Friday due to a rise in demand for safe-haven assets.

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