Dollar Retreats Amidst Soft Jobs Data

(RTTNews) - The U.S. dollar declined against major currencies during the week ended July 3 amidst weaker-than-expected jobs data from the U.S. that cast doubts on the Fed's ability to hike interest rates immediately. The improving geopolitical situation in the Middle East and the resultant decline in crude oil prices also dragged down the dollar. The dollar's retreat was also in cognizance of recent comments on inflation from Fed Chair Kevin Warsh.

During week ended July 3, the U.S. dollar inter alia declined against the euro, the British pound, the Australian dollar, the Japanese yen, the Swedish krona as well as the Swiss franc. It however edged up against the Canadian dollar. As a result, the Dollar Index which measures the Dollar's strength against a basket of 6 currencies dropped almost half a percent on a weekly basis. Here is a quick recap of the dollar's trajectory during the week ended July 3.

Data released on Tuesday by the U.S. Bureau of Labor Statistics showed job openings at 7.59 million in May, surpassing market expectations of 7.30 million and implying a resilient labor market.

Anxiety ahead of the speech by Fed Chair Kevin Warsh at the ECB Central Banking Forum at Sintra, Portugal boosted the greenback. The dollar however eased on Wednesday following Fed Chair Kevin Warsh's comments that inflation risks have come down. He however refused to issue any forward guidance regarding monetary policy.

Data released on Wednesday showed the ISM Manufacturing PMI falling to 53.3 in June, from 54.0 in May and missing market expectations of 54. The latest reading which indicated a slowdown in the manufacturing sector also weighed on the dollar.

Data released on Thursday by the U.S. Bureau of Labor Statistics showed an addition of 57 thousand to non-farm payrolls during June versus a downwardly revised 129 thousand in May and 110 thousand that the markets had anticipated. The unemployment reading which was expected to remain steady at 4.3 percent however declined to 4.2 percent. The data significantly reduced the expectations of a Fed rate hike that had built up of late.

Amidst the developments and the data releases, the Dollar Index traded between the weekly high of 101.60 recorded on Wednesday and the weekly low of 100.56 recorded on Thursday. The index eventually closed the week's trading at 100.86, implying a decline of 0.49 percent from the level of 101.36 on June 26. The decline is mainly attributed to markets tempering expectations of a rate hike by the Federal Reserve after the release of the jobs data.

Bolstered by the dollar's weakness, the EUR/USD pair jumped 0.47 percent during the week ended July 3. The common currency's surge against the greenback came amidst lower-than-expected inflation readings for June. From the weekly low of 1.1362 touched on Wednesday, the pair climbed to a high of 1.1473 on Thursday. The pair eventually closed the week at 1.1437, versus 1.1384 a week earlier. Flash readings released on Thursday showed Eurozone consumer price inflation dropping to 2.8 percent, down from 3.2 percent in May and below market expectations of 3 percent.

The British pound rallied 1.1 percent against the greenback during the week ended July 3. The GBP/USD pair which had closed at 1.3203 on June 26 closed trading for the week ended July 3 at 1.3352. The weekly trading range was wider, between a low of 1.3186 recorded on Monday and a high of 1.3386 recorded on Thursday.

The Australian Dollar rallied more than half percent against the U.S. Dollar during the past week. Minutes of the meeting of the Reserve Bank of Australia released earlier in the week showed RBA signalling that the rate hikes were having the expected effect. The AUD/USD pair rallied from the level of 0.6899 recorded on June 26 to close the week ended July 3 at 0.6941. During the week, the pair oscillated between a low of 0.6865 recorded on Tuesday and the high of 0.6950 recorded on Friday.

The U.S. dollar declined against the Japanese yen also during the week ended July 3. The USD/JPY pair closed the week at 161.38 versus 161.76 a week earlier, registering a loss of 0.23 percent. During the week, the pair oscillated between the high of 162.85 recorded on Wednesday and the low of 160.52, touched on Friday. Bearish bets on the yen as well as the widening interest rate divergence had caused the yen to drop to a 40-year low against the dollar.

Amidst anxiety ahead of the release of the FOMC minutes on Wednesday, the dollar has firmed up. The six-currency Dollar Index touched a high of 101.15 and is currently trading at 101.06, implying an overnight addition of 0.21 percent from Friday's closing level of 100.86.

The EUR/USD pair is currently trading 0.20 percent lower at 1.1414 versus 1.1437 on Friday. The GBP/USD pair is currently trading 0.05 percent lower at 1.3345 versus 1.3352 on Friday. The AUD/USD pair is currently trading 0.10 percent lower at 0.6934 versus 0.6941 on Friday. Amidst the dollar's rebound, the USD/JPY pair is now trading 0.61 percent higher at 162.37 as compared with the level of 161.38 recorded at the end of the previous week.