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US dollar gains following NFP report

Monday, April 08, 2024

Today’s headlines

What’s happening: The US dollar strengthened on Friday following the release of the nonfarm payrolls (NFP) report for March.

What happened: The data showed US employers hiring higher-than-expected workers last month.

A stronger labour market fuelled speculations of the Federal Reserve delaying its interest rate cuts.

Why it matters: Data released on Friday showed that the US economy added 303,000 jobs in March, the most in ten months, versus 270,000 job adds in February. The latest reading also surpassed market estimates of 200,000 job adds.

The unemployment rate in the US also eased to 3.8% in March, from the previous month’s two-year high of 3.9%. Average hourly earnings for all employees on US private nonfarm payrolls rose by 0.3% to $34.69 in March, following a 0.2% gain in the previous month, and in-line with expectations.

Traders pared back speculations of an interest rate cut in June, following the release of the NFP report.

The US dollar remained highly volatile last week, falling from a five-month high to a two-week low following an unexpected decline in the US services index.

After starting the week under pressure, the greenback rebounded on Thursday following comments from Minneapolis Fed President Neel Kashkari saying that the central bank may not cut rates in 2024 in case inflation remains sticky.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained 0.16% to 104.29 on Friday. However, the index ended the week down around 0.3%.

The EUR/USD rose 0.14% to 1.0851, while the GBP/USD forex pair rose 0.01% to 1.2638 on Friday. The USD/JPY bucked the trend and moved higher to 151.61.

What to watch: Investors await the release of inflation data this week, which is expected to significantly impact the US dollar’s movement ahead. The annual inflation rate in the US, which rose to 3.2% in February, is expected to accelerate further to 3.4% in March. However, on a monthly basis, the Consumer Price Index is projected to rise 0.3% in March, following a 0.4% gain in February.

Data on Producer Price Index and initial jobless claims, due to be released on Thursday, will also remain focus.

The markets today

European stocks will be in focus today ahead of this week’s interest rate decision

Context: Equity markets in Europe closed lower on Friday, with the European benchmark stock index falling to more than a two-week low.

Details: Optimism around interest rate cuts by the ECB (European Central Bank) and the US Federal Reserve have resulted in sharp gains in equity markets around the world since the beginning of this year.

However, hawkish remarks from some US Fed members and stronger-than-expected US jobs data impacted market sentiment on Friday.

Eurozone bond yields rose following the release of the US NFP (nonfarm payrolls) data, exerting pressure on European stocks during Friday’s session.

Data released on Friday showed European house prices declining 1.1% year-over-year in the fourth quarter, after a 2.2% decline in the prior quarter. Retail sales in the Eurozone contracted by 0.5% in February, more than market estimates of a 0.4% decline. The HCOB Eurozone construction PMI also declined to a reading of 42.4 in March, from the previous month’s 42.9.

The STOXX Europe 600 Index dipped 0.84% to close at 506.55 on Friday, recording its worst session since early February. For the week, the continent-wide index lost 1.2%, logging its worst weekly decline since mid-January.

Utilities, retail and telecommunications shares were among the worst performing stocks on Friday.

London’s FTSE 100 fell 0.81% to close at 7,911.16 on Friday, while Germany’s DAX 40 and France’s CAC 40 lost 1.24% and 1.11%, respectively.

What to watch: Investors await the interest rate decision from the European Central Bank this week. The ECB is widely expected to keep interest rates unchanged at its meeting on Thursday.

The release of economic reports from several European nations will also remain in focus.

Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.80%, 1.11% and 1.28%, respectively.

The news shaping the markets

The UN’s International Atomic Energy Agency warned that the attack on Ukraine’s Zaporizhzhia plant had increased the risk of a “major” nuclear accident. The news sent the RUB/USD pair slightly lower in forex trading this morning.


Australia’s value of new home loans grew by 1.6% to A$ 16.87 billion in February, after a 0.9% decline in the earlier month, lending support to the AUD/USD forex pair.


Japan’s average cash earnings rose by 1.8% year-over-year in February, easing from a 2% surge a month ago, which sent the JPY/USD pair lower in forex trading this morning.


China’s foreign exchange reserves grew by $19.8 billion to $3.246 trillion in March, topping market estimates of a decline to $3.21 trillion, which lent support to the CNY/USD forex pair.


Canada’s Ivey Purchasing Managers Index rose to 57.5 in March, versus February’s reading of 53.9, which sent the CAD/USD pair higher in forex trading this morning.

What else to watch today

Germany’s exports, imports and industrial output, South Africa’s foreign exchange reserves, France’s foreign exchange reserves, Turkey’s industrial production and total vehicle sales, Singapore’s foreign exchange reserves, US consumer inflation expectations for the year ahead, as well as Brazil’s car production, new vehicle sales and Central Bank of Brazil’s focus market readout.


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