The dollar index (DXY00) fell to a 2-week low today and is down by -0.68%. The dollar tumbled today on the weaker-than-expected US Jun payroll report, which dampened speculation that the Fed will tighten monetary policy anytime soon. The dollar is also under pressure amid weakness in crude oil prices, as WTI crude fell to a 4.25-month low today, which lowers inflation expectations and is dovish for Fed policy. The dollar found some support after weekly jobless claims unexpectedly declined and after May factory orders fell less than expected.
US Jun nonfarm payrolls rose +57,000, weaker than expectations of +113,000, and May nonfarm payrolls were revised lower to +129,000 from the originally reported +172,000. The Jun unemployment rate unexpectedly fell -0.1 to a 1-year low of 4.2%, showing a stronger labor market than expectations of no change at 4.3%.
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US Jan average hourly earnings rose +0.3% m/m and +3.5% y/y, right on expectations.
US weekly initial unemployment claims unexpectedly fell -1,000 to 215,000, showing a stronger labor market than expectations of an increase to 218,000.
US May factory orders fell -1.3% m/m, a smaller decline than expectations of -2.0% m/m. Also, May factory orders ex-transportation rose +1.9% m/m, stronger than expectations of +1.0% m/m and the biggest increase in more than 4 years.
The swaps markets are discounting the odds at 20% for a +25 bp rate hike at the next FOMC meeting on July 28-29.
EUR/USD (^EURUSD) climbed to a 1.5-week high today and is up by +0.61%. The euro is moving higher today after the weaker-than-expected US Jun payroll report knocked the dollar lower. The euro also received support from today’s Eurozone economic news, which showed Italy’s unemployment rate unexpectedly fell to a record low, a hawkish factor for ECB policy.
Italy’s May unemployment rate unexpectedly fell by -0.1 to a record low of 5.0% (data from 2004), showing a stronger labor market than expectations of no change at 5.1%.
The markets are discounting a +3% chance for a +25 bp rate hike by the ECB at its next policy meeting on July 23.
USD/JPY (^USDJPY) today is down by -0.97%. The yen rallied sharply today to a 2-week high against the dollar after a Reuters report fueled speculation that Japanese authorities were preparing to intervene in the currency market to support the yen. The yen also has support from the jump in Japanese government bond yields, with the 10-year JGB yield rising to a 5-week high of 2.787% today, strengthening the yen’s interest rate differentials. The yen added to its gains today after T-note yields fell on the weaker-than-expected US Jun payroll report.
