US Dollar Sinks to Multi-week Lows as April’s NFP Delivers a Shock to Markets
The US dollar is starting the fresh trading week on a bearish note, continuing the weakness from late last week following the disappointing non-farm payrolls report that could encourage the Fed to stay on course with its dovish tone for longer. At the time of writing, the US dollar index DXY is trading around 90.27.
While markets were extremely hopeful that the US economy added close to a million jobs over the month of April, the US Labor Department’s official employment report showed an increase of a mere 266k non-farm payrolls for the period. In addition, March’s reading was also revised lower from 916k to 770k, indicating that the strain in the labor market is far from over despite promising signs of economic recovery recently.
There was some expectation among traders that a strong NFP number might be able to convince Fed officials to look at tightening the monetary policy sooner than previously anticipated, although such a scenario has been repeatedly shot down by Chairman Jerome Powell and his team. The US dollar sank to the multi-week lows against its major rivals not only on account of the weak data but also because it reinforces the Fed’s stance that the economy is nowhere close to reaching its pre-pandemic performance.
Over the coming sessions, the US dollar is also likely to feel the strain from an improvement in the global economic outlook, as this could put downward pressure on the safe haven appeal of the reserve currency. On the other hand, its riskier rivals, especially the EUR, GBP and leading commodity currencies CAD, AUD and NZD could see some strengthening as the market sentiment edges higher.
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