Dollar Jumps on Strong U.S. Payroll Report

The dollar index (DXY00) on Friday rose by +0.85%.  The dollar Friday raced higher as the stronger-than-expected U.S. July payroll report will pressure the Fed to keep aggressively tightening monetary policy.  In addition, higher T-note yields Friday strengthened the dollar’s interest rate differentials after the 10-year T-note yield climbed to a 2-week high of 2.867%. 

U.S. economic data Friday was solidly bullish for the dollar.  U.S. July nonfarm payrolls rose +528,000, stronger than expectations of +250,000 and the biggest increase in 5 months.  Also, the July unemployment rate fell -0.1 to 3.5%, matching a five-decade low and showing a stronger labor market than expectations of no change at 3.6%. In addition, July average hourly earnings rose +0.5% m/m and +5.2% y/y, stronger than expectations of +0.3% m/m and +4.9% y/y.  Finally, June consumer credit rose +$40.154 billion, stronger than expectations of +$27.0 billion.

EUR/USD (^EURUSD) on Friday fell by -0.0065 (-0.63%).  A jump in T-note yields Friday from the stronger-than-expected U.S. July payrolls report boosted the dollar’s interest rate differentials and weighed on the euro.  EUR/USD moved lower Friday despite better-than-expected Eurozone economic data. 

Friday’s Eurozone economic data was bullish for EUR/USD.  German June industrial production unexpectedly rose +0.4% m/m, stronger than expectations of -0.3% m/m.  Also, France June industrial production unexpectedly rose +1.4% m/m, stronger than expectations of -0.3% m/m and the biggest increase in 5 months.

USD/JPY (^USDJPY) on Friday rallied sharply by +1.57% and posted a 1-week high.  The yen tumbled Friday after stronger-than-expected U.S. July payroll data fueled a jump in T-note yields.  Divergence in government bond yields also weighed on the yen as the 10-year JGB bond yield fell to a 4-3/4 month low Friday of 0.166% and the 10-year T-note yield rose to a 2-week high of 2.867%.

Friday’s Japanese economic data was mixed for the yen.  On the bearish side, the Japan June leading index CI fell -0.6 to a 4-month low of 100.6. Conversely, Japan June household spending rose +3.5% y/y, stronger than expectations of +1.5% y/y and the biggest increase in 5 months.

October gold (GCV22) Friday fell by -15.70 (-0.87%), and September silver (SIU22) fell by -0.280 (-1.39%).  Precious metals Friday posted moderate losses. A rally in the dollar index toa 1-week high Friday weighed on metals prices.  Gold was also under pressure after the 10-year T-note yield Friday climbed to a 2-week high.  Also, continued long liquidation by funds in gold is weighing on gold prices after long gold positions in ETF’s fell to a 5-month low Thursday.

• Stocks Lower as Strong Payroll Report Keeps Aggressive Fed in Play
• Beaten-Down Software Stocks Show Earnings Resilience
• Stocks Lower as Strong Payroll Report Keeps Aggressive Fed in Play
• Dollar Declines on Lower T-Note Yields