The United States Dollar is taking heavy losses this morning after employment data out of the US missed expectations.
The US economy added 150,000 jobs in the month of October, below expectations of 180,000 and well below the average reading of 260,000 for the last few months. September’s gangbusters figure was also revised down to below 300,000. In addition, the unemployment rate ticked up to 3.9%, and average hourly earnings month-over-month held steady. The Dollar Spot Index has lost roughly two-thirds of a percent this morning, and treasury yields across the board are down.When put into the context of Wednesday’s Fed meeting and press conference, this downside miss is definitely good news for the central bank. Powell, without explicitly stating it, did clarify that the Fed doesn’t necessarily want to hike interest rates one final time but would keep the possibility on the table if economic data continued to run as hot as it has been through the first half of this year. Though obviously with a note of caution, today’s data does point more toward a soft landing as it represents a very substantial easing in financial conditions – which were added to the Fed’s statement for the first time earlier this week. We still don’t see the shock Q4 recession that some economists are predicting in the picture, but today’s figures paint of a picture of a cooling economy, something the Fed has stated is needed since much earlier this year. Still remaining today are S&P Global services and composite PMI readings, as well as the ISM services index. If these numbers can cool from last month’s reading as well, we expect this trend of dollar weakness to continue through the day. We do believe this could be the beginning of the end of the unprecedented Dollar strength seen in the second half of this year as economic conditions around the world deteriorate.
What to Watch Today…
- S&P Global US Services & Composite PMI, Friday 9:45AM
- ISM Services Index, Friday 10AM
- Monex USA Online is always open
The Loonie, on the heels of US jobs data, is gaining against USD for the third straight session, strengthening a third of a percent this morning and more than a percent on the week. Canadian jobs figures did miss expectations this morning as well, adding 17.5k jobs last month compared with the previous month’s surprise reading of 63.8k. Hourly wages grew less than in September as well. Though ordinarily, this could spell weakness for CAD, markets are giving more weight to US figures today.
Australian and New Zealand Dollars are both roughly a percent stronger against USD this morning, once again as a result of weaker-than-expected US data. Earlier this week, Australian retail sales for the month of September surprised higher, coming in with 0.9% growth on expectations of 0.3% growth. The Reserve Bank of Australia meets next Monday, and while the odds of a rate hike are slightly below 50%, strong data from the Antipodean nation has prompted the RBA’s governor Michelle Bullock to leave the door open to further hikes.