After falling much of yesterday, the U.S. dollar was unable to retrace its losses and opened this morning mostly flat from yesterday’s close. The greenback fell after two separate manufacturing reports failed to meet market expectations yesterday morning.
The U.S. dollar has recommenced its sell-off this morning after Non-Farm payrolls failed to meet expectations. Payrolls rose by only 151K I in the month of August, failing to meet expectations of a 180K, according to the Labor Department. The headline has disappointed market participants and traders will now push back expectations of a September rate hike, weighing on the greenback.
The report was not all negative, however. Last month’s reading was upwardly revised to 275K jobs created from 255K. And while the jobless rate (4.9%) and participation rate (62.8) were unchanged, wages gained modesty last month.
The result of today’s major data has solidified our view that the Federal Reserve will not find the scope to raise interest rates until at least December, after the U.S. elections in November.
A combination of disappointing U.S. data and a strong reading from the U.K.’s Manufacturing Purchasing Managers’ Index caused the British pound to gain 1.5% against the U.S. dollar during yesterday sessions. The British pound was able to hold its gains overnight ahead of the much-anticipated Non-farm payrolls print in the U.S. The sterling is set for its third straight weekly advance against the U.S. dollar after touching a multi-decade low on August 15th.
Indeed, the sterling is set to gain against all of its 31 major counterparts this week.
Despite general dollar weakness this morning, the Japanese yen has been unable to take advantage. The yen is more than 3.0% lower against the U.S. dollar over the past seven trading session as policy divergence remains center stage. Fundamental data releases from the island nation have continued to disappoint, highlighting the potential need for the Bank of Japan to bolster its monetary stimulus. Meanwhile, the conversation in the U.S. has shifted to “when” not “if” the Federal Reserve will tighten policy in the coming months.