The U.S. Dollar jumped a bit this morning as FX reaction settles following the release of Employment Situation figures indicating there is a strong labor sector in the U.S.
Overview
January Non-Farm Payrolls came in lower than expected for in at 143K vs. 175K, however, December numbers were revised upward significantly from an original reading of 256K to 307K. average Hourly Earnings rose by 0.5% instead of just 0.3% estimated while the Unemployment Rate came down from 4.1% to 4.0%. While the Buck is not flourishing necessarily, it is clear that most currencies have lost the momentum that was carrying them to gains early in the week.
While treasury yields are going up, stocks are mixed and the main currency to lose to the Buck is the Japanese Yen, which had been on the rise as another source of safe haven as some traders panicked over tariffs. For now, the narrative is of stable U.S. economy that is steadily growing and improving following a round of cuts to interest rates. The Fed may not need to stimulate with further cuts anytime soon so the Dollar could see more fortunes from this as central bank policy divergence has re-emerged with other countries choosing to do the opposite by being more stimuli driven.
What to Watch This Week…
- Monex USA Online is always open
MXN ⇓
The Mexican Peso is down by over half a percent following Banxico’s announcement cutting interest rates by 50 basis points. The central bank officials pointed at tamed inflation as room for deeper cuts while also concerned that growth has met contractionary pressures. The change from 10.0% interest rate to 9.5% may be the beginning of loose policy in Mexico and across LATAM to counter the uncertainty over economic turbulence via tariffs.
GBP ⇑
The Pound improved after dropping naturally from the Bank of England’s decision to cut interest rates by 25 basis points. Yesterday’s announcement was marked by some “hawkish” sentiment on inflation while there was no consensus on growth, which they feel is still too stagnant. Perhaps the budget adding the fiscal boost along with lowered borrowing costs can lead towards better economic indicators down the line.
