US dollar jumps on strong jobs data, gold tumbles
The US non-farm payrolls report was well received as the headline reading was 943,000, easily beating the 870,000 forecast. In addition to that, the June report was revised up to 938,000 from 850,000. The unemployment rate saw a sizeable drop to 5.4%, from 5.9%. Lastly, the wages were strong too as yearly average earnings rose to 4%, beating the 3.9% estimate. It was a very impressive jobs report as all aspects of the announcement point to a healthy improvement in the labour market. At last month’s Federal Reserve meeting, Jerome Powell, the Fed boss, said the US economy is improving but it has failed to make substantial progress towards its economic targets. Considering, today’s jobs data, it is fair to say the US labour market is heading in the right direction.
By-and-large, US equity markets have reacted positively to the figures, as the S&P 500 and the Dow Jones set all-time highs, while the tech-heavy NASDAQ 100 is in the red. It is worth noting the NASDAQ has outperformed the other benchmarks recently, so perhaps some traders are keen to snap of traditional stocks now there is further evidence the US rebound is continuing.
The US dollar was jolted higher by the jobs report as it is likely there will be increased chatter about when the Fed will look to taper their very generous bond buying scheme. Judging by the commentary of the Fed at its last meeting, it seems unlikely the central bank will be adopting hawkish language in the near-term, but the robust jobs update adds weight to the argument the bank is moving towards achieving its goals. EUR/USD was relatively weak going into today’s numbers, as it fell in the previous three sessions, so it was hit hard today. USD/CAD is pushing higher as the Canadian jobs data was good, but not great. Canada’s unemployment rate dipped to 7.5%, but it fell short of the 7.4% consensus estimate, also, the employment change was 94,000, missing the 148,500 that economists had predicted. WTI and Brent crude have slipped into negative territory, so that has dented “the loonie” too. Oil has been losing ground recently as concerns of oversupply in US, and demand woes due to Covid-19.
Gold and silver have lost their shine thanks to the jump in the US dollar, following the non-farm payrolls announcement. The metals tend to have an inverse relationship with the greenback, so that is part of the selling pressure. It is also possible that some traders are keen to take one more risk, seeing as the US economy is stronger, and buy stocks, instead of gold – which is often considered to be a safe-haven asset.