US dollar rises on upbeat NFP data

The news shaping the markets today

A powerful blast damaged Russia’s Crimean Bridge, hitting Moscow’s primary supply route to its forces. US crude oil futures traded lower this morning.

Australia’s services index fell to 48.0 in September, from 53.3 in the previous month. The latest reading signalled a contraction after two months of growth, exerting pressure on the AUD/USD forex pair.

Ireland’s construction PMI rose to 50.2 in September, from 46.9 in the previous month. This being the first growth in the country’s construction output since May sent the EUR/USD pair higher in forex trading this morning.

China’s general services PMI fell to 49.3 in September, from 55.0 a month ago. Despite the first contraction in the services sector since May, the CNY/USD forex pair remained under pressure.

US consumer credit rose to $32.24 billion in August, from $23.81 billion in the previous month. The Dow Jones index traded lower by more than 600 points on Friday.

What’s happening: The US dollar recorded gains on Friday, following the release of the all-important nonfarm payrolls (NFP) data.

What happened: The greenback strengthened versus major peers after data showed a higher-than-expected increase in nonfarm jobs for September.

The strong labour market supported speculations of the Federal Reserve maintaining its hawkish stance.

Why it matters: The US Labor Department said on Friday that nonfarm payrolls in the country had risen by 263,000 in September, versus a gain of 315,000 jobs in the previous month. Although this marked a decline from the August job ads, the figure came in higher than the optimistic consensus estimate of 250,000 jobs.

The unemployment rate eased to 3.5% in September, from 3.7% in the earlier month.

The US Federal Reserve has aggressively raised its benchmark interest rates, from near zero at the beginning of the year to a range of 3.00% to 3.25% in September. The rate hikes triggered worries about an adverse impact on the US labour market, which would have restricted the central bank’s moves.

However, the latest data showed a stronger-than-expected labour market, raising speculations of another big rate hike by the Fed to combat rising inflation. The annual inflation rate in the US fell for a second consecutive month to 8.3% in August, from 8.5% a month ago.

The US dollar index, which measures the greenback’s performance versus a basket of currencies, climbed 0.44% to close at 112.75 on Friday. The index has gained close to 18% year to date.

The USD/JPY forex pair had declined in early trading but ended the session higher by 0.15% at 145.35. The greenback had climbed to a 24-year high of 145.90 yen last month, forcing the Japanese authorities to intervene in the financial markets.

The EUR/USD forex pair also moved lower, extending losses following the release of the US jobs data. The euro declined 0.54% to close at $0.9740 on Friday. The GBP/USD fell 0.62% to 1.1093.

What to watch: Traders await the release of consumer price data from the US, due for release this Thursday, which will provide more insight into the central bank’s moves at its November policy meeting. Market experts are currently projecting another rate hike of 75 basis points.

Markets will also monitor speeches from various Fed members, including US Chicago Fed President Evans and Fed Vice Chair Lael Brainard.

The markets today

Bitcoin will be in focus today after some recovery last week

Context: Bitcoin had climbed past $20,000 last week but failed to hold above that level over the weekend.

Details: The cryptocurrency market recorded gains last week, after remaining under pressure in the previous week. Bitcoin’s dominance in the market rose to 41%, from 39% in the same period last month.

The cryptocurrency market saw a rise in volatility last week, as traders assessed rising inflation levels and fluctuations in the greenback.

Both cryptos and equities rebounded last week, with some recovery in investor risk appetite. Although Bitcoin continued its uptrend, it was unable to hold above the major psychological resistance level of $20,000.

The second largest cryptocurrency, Ethereum, has been feeling the heat from several macroeconomic issues after its Big Merge. However, the cryptocurrency remained above the $1,300 mark last week.

What to watch: Traders will keep an eye on major economic releases, which are expected to provide some direction to the cryptocurrency market in the week ahead. Cues on further rate hikes by major central banks around the world will also impact the crypto universe.

Other Markets: European trading indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.09%, 1.59%, 1.17% and 1.18%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Saudi Arabia’s industrial production, Turkey’s Unemployment rate, labour force participation rate and total motor vehicles production, Central Bank of Brazil’s focus market readout, as well as South Africa’s SACCI business confidence index.