Those hoping that the USD would be thrown a lifeline may be in luck, following the news that the United States added another 209,000 jobs to its economy in July. This is an overall positive employment report and highlights the underlying strength of the US labor market. Figures exceeded expectations, with earlier projections sitting at 183,000 and wage growth, with average earnings rising by an annualized 2.5%, being further good news for the US Dollar.
I would expect the Dollar to receive a bid following this employment report and with this in mind, it provides a subtle reminder to investors, that the USD is oversold on an economic basis.
If the Dollar does not encounter a significant round of purchasing following this number, it may be due to investors “selling the news” that the current stance from the Federal Reserve is an uncertain one. Despite the fact that the Federal Reserve has indicated that raising US interest rates is a priority, no one can ascertain if the unwinding of its balance sheet has taken precedence.
Another factor to consider is whether ongoing political uncertainty and reduced confidence in the ability of Donald Trump to implement his promised legislative reforms, have made investors hesitant about purchasing the Dollar.
Commented by Jameel Ahmad, Vice President of Corporate Development and Market Research at FXTM