Dollar Losing on Awful Jobs Print

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Dollar Losing on Awful Jobs Print

OCTOBER 08, 2021

It was more “wait and see” type trading overnight as the dollar swung from modest gains to minimal losses. 

Overview

Overall, the Dollar Index was unchanged overnight.  The time for waiting is over, however.  The U.S. only added 194K jobs in the month of September, badly missing estimates of 500K.  The only bright side is that revisions from the past two months netted a 169K gain.  The Unemployment rate fell from 5.2% to 4.8%.  Regardless, the report is highly disappointing, and the U.S. dollar is selling off in the immediate aftermath.

Coming into the data, the market consensus was that a print above 200K jobs would be enough to keep the Fed on track to start pairing back its monetary stimulus next month.  Today’s numbers may give the Fed pause.  The U.S. labor market obviously has a long way to go to improve.  If the Fed decides not to start their “taper” next month, the U.S. dollar would likely experience losses.  We will monitor the fallout of today’s number and the potential impact on monetary policy.  In the immediate near term, trades are taking profits near multi-month highs.

What to Watch Today…

  • No major economic events scheduled for today

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EUR  

The Euro remains near recent lows against the U.S. dollar.  The common currency was unable to take advantage of the uptick in risk sentiment yesterday after the U.S. Senate passed a bill that pushed the American debt fight until December.  Traders appear to be finding the new, lower range for EUR/USD.

It remains our opinion that in the longer term, the Euro is undervalued versus its American rival. Unchecked rises in energy prices, more prolonged supply chain issues and perhaps the U.S. debt fight in December all pose risks to our forecasts, however.   We also cannot discount a possibility of a resurgence of Covid-19 or a new variant.

CAD  

The Canadian dollar popped to a monthly high against the U.S. dollar early this morning. The loonie took advantage of another rally in the price of energy.  WTI oil climbed half a percent and is trading close to the highest level since 2014 that it touched earlier this week.

Canada released its employment data at the same time as the United States with a completely different result.  Canada added 157,100 jobs in August, blowing out expectations of 60K jobs added.  The loonie is extending its gains versus the greenback and is half a percent stronger in the minutes following the data.

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