Weak US Jobs, Weaker US Dollar
$C, $DXY
Citigroup Inc. (NYSE:C) is the top foreign-exchange trader by volume and 1 of the banks to correctly forecast a weaker-than-projected jobs report.
The top currency trader said that Friday’s data will cause the Dollar to depreciate. Now with the Fed less likely to raise interest rates due to global economic growth concerns, the bank sees refuge currencies including JPY and the EUR benefiting.
The Dollar Spot Index marked a 2 week low after a US Labor Department report showed the economy added 142,000 jobs in September, trailing forecasts of 201,000. The index was trading higher just before the 8:30a EDT Friday release of the report.
“The last trades going into the number were going the wrong way, so that basically exacerbates the impact,” said the global head of Group-of-10 foreign exchange-strategy in New York at Citigroup. “Emerging markets are going nowhere and Europe and Japan are appreciating.”
The Dollar Spot Index, which tracks the USD against 10 major peers, fell 0.4% to 1,208.91 this week in New York. The Buck dropped 0.2% to 1.1216 per EUR and lost 0.6% to 119.91 JPY.
The Global Currency Manager Index, which tracks the returns of Fx ( foreign-exchange) funds, fell 0.2% to 128.15, its lowest point since June 29. Prior to Friday’s data, the Dollar Spot Index typically rose 0.3% 1 hour after the release of the past 12 employment reports.
Currency traders pared bets on a Y 2015 Fed rate hike and subsequent increases after the labor data was published.
The probability the futures market assigns for a boost at or before the central bank’s March 2016 meeting is 56%, down from 66% Thursday. The calculation is based on the assumption that the effective fed funds rate will average 0.375% after liftoff.
The USD has trailed EUR and JPY during the past 3 months, advancing 2.6% within a basket of 10 major peers, according to data from the Correlation- Weighted Indexes.
The weak employment data means the European Central Bank (ECB) and the Bank of Japan (BOJ) will not be able to wait for the Fed to boost interest rates before they have to take additional measures to stabilize their currencies. This year, ECB and BOJ officials have publicly considered adding to their already unprecedented monetary stimulus this year.
Friday’s data are “good for Group-of-Five safe-haven currencies: EUR, GBP,JPY,and CHF.
Have a terrific week.
HeffX-LTN
Paul Ebeling
The post Weak US Jobs, Weaker US Dollar appeared first on Live Trading News.