The U.S. Dollar is trading in a mixed direction to end an eventful week. Today’s Non-Farm Payroll figures for April revealed a much higher reading than expected, coming in at 253K versus the 185K forecast.
Overview
Furthermore, March’s numbers were revised upward to show 236K payrolls were added instead of just 165K. The Unemployment Rate was also surprising by dropping from 3.6% vs. 3.4% estimated. Clearly, the buck can be given merit as the labor sector in the U.S. gives the Fed room to hike slowly but surely and stay away from cutting interest rates at any point for what is left of 2023.
Nevertheless, this development is not causing a massive rally. In fact, currencies belonging to countries with hawkish central banks rising against the buck, such as MXN, AUD, and CAD. On the other hand, the Swiss Franc and the Yen, belonging to central banks that are acting relatively dovish and not increasing borrowing costs, are down by one percent.
Mexican Peso is also lifted as oil prices are on the rise this morning. Expect more confusion over Fed timing as we hear comments from all sides regarding the shock in labor sector stats. For now, we feel quite sure the Fed will be able to meet without cutting this year.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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EUR ⇓
The Euro is closing the week down, surprising us all bullish on the shared currency after a week that established commitment to contractionary monetary policy. Regardless of the European Central Bank’s 25-basis-points hike and a determined Governor Christine Lagarde preparing the press for more hawkish action to come, the Euro is dropping from disappointment in some corners that they did not hike by 50bps. We feel that as long as economic figures rise steadily, we can expect Euro to appreciate significantly as rates keep rising to combat inflation and change course after years of expansion as well as stimulus-driven thinking.
MXN ⇑
The Mexican Peso is trading around its strongest levels since mid-2016. Commodities and oil prices rising are aiding the currency that has been one of the best performers of the year. Economic strength behind it, MXN has merited its rise, but some are wondering if the potential for a pause in the tightening cycle by Banxico will end the currency’s fine run. Inflation slowed down in April. Historically, Peso has dropped as fast as it has appreciated in the past 3+ years of pandemic effects and turmoil. For now, a very good economy is holding MXN at multi-year highs but be warned that any doubts over politics and economic consistency could dent it and quickly.
