US DOLLAR PRICE OUTLOOK: DXY INDEX PIVOTS LOWER ON MIXED NONFARM PAYROLLS DATA
- US Dollar bears are steering the Greenback lower in response to a mixed bag NFP report
- The broader DXY Index erases intraday gains as the unemployment rate climbs to 5.9%
- Headline net change in nonfarm payrolls topped forecast with 850K jobs added in June
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US Dollar price action is coming under pressure as markets digest the latest round of NFPs. The broader DXY Index pivoted about -0.2% lower in immediate reaction to what looks like a mixed bag jobs report. EUR/USD and GBP/USD price action jumped 26-pips and 41-pips respectively while USD/CAD pivoted 30-pips lower following the data.
Headline nonfarm payrolls increased by 850,000 in June and blew bast the consensus forecast looking for 720,000 job gains. Interestingly, however, the unemployment rate ticked higher from 5.8% to 5.9%, which disappointed markets expecting a drop to 5.6%. The labor force participation rate held steady at 61.6% and average hourly earnings grew at a 3.6% year-over-year.
DXY – US DOLLAR INDEX PRICE CHART: 15-MINUTE TIME FRAME (01 JUL TO 02 JUL 2021)
We noted in our NFP preview that a mixed bag scenario could be viewed as a disappointment to US Dollar bulls and Fed hawks. Such seems to be the case. To be fair, though, there is an interesting note about the unemployment rate in the details of the NFP report. Specifically, the Bureau of Labor Statistics noted that “among the unemployed, the number of job leavers – that is, unemployed persons who quit or voluntarily left their previous job and began looking for new employment – increased by 164,000.”
This, in addition to rising wage inflation, speak to strong underlying labor market demand. The Federal Reserve may take a cautious and ‘half glass empty’ view of NFPs nevertheless as doing so likely affords the central bank with more time to delay the kickoff of tapering asset purchases. As such, we might see a continued unwind of recent US Dollar strength.
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