Fall In U.S. Employment Drags Dollar Down


The U.S. dollar weakened against its major counterparts in the European session on Friday, as the nation’s employment shrank unexpectedly in December, signaling that surging COVID-19 infections and restrictions have paused recovery in the labor market.

Data from the Labor Department showed that non-farm payroll employment fell by 140,000 jobs in December after climbing by an upwardly revised 336,000 jobs in November.

The decline surprised economists, who had expected employment to increase by about 71,000 jobs compared to the addition of 245,000 jobs originally reported for the previous month.

The unemployment rate came in at 6.7 percent in December, unchanged from November. Economists had expected the unemployment rate to inch up to 6.8 percent.

The currency was higher early in the session, as the U.S. treasury yields continued to rise on expectations of more fiscal stimulus under the Biden administration.

The prospect for more fiscal spending triggered a selloff in U.S. treasuries, lifting the yields.

Investors bet that the control of the Senate would enable President-elect Joe Biden to pass his agenda.

On Thursday, Richmond Federal Reserve President Thomas Barkin said that he was delighted to see the rise in market indicators of inflation expectations.

The second half of the year is likely to be robust, as the vaccine distribution gathers speed.

Echoing his remarks, St. Louis Fed President James Bullard said that there are the ingredients for higher inflation, with very powerful fiscal policy.

The economy is likely to boom when the impact of new coronavirus vaccines is shown.

The greenback advanced in the Asian session, driven by a strong rally in the treasury yields.

The greenback was down by 0.7 percent at 0.8822 against the franc, after a 10-day rise to 0.8885 at 3:00 am ET. At yesterday’s trading close, the pair was quoted at 0.8842. The greenback may challenge support around the 0.87 region, if it slides further.

Data from the State Secretariat for Economic Affairs showed that Switzerland’s jobless rate was stable in December.

The jobless rate was a seasonally adjusted 3.4 percent in December, same as seen in November. Economists had expected a rate of 3.5 percent.

The greenback dropped 0.6 percent to 1.2285 against the euro, following a 10-day high of 1.2213 seen at 3:00 am ET. The pair was worth 1.2270 when it closed deals on Thursday. The greenback is seen challenging support around the 1.24 mark.

Data from Eurostat showed that the euro area unemployment rate declined slightly in November.

The jobless rate dropped to 8.3 percent from 8.4 percent in October. The rate was forecast to rise to 8.5 percent.

The greenback was lower by 0.7 percent at a 2-day low of 1.3636 against the pound, after having climbed to 1.3538 at 8:15 pm ET. The pound-greenback pair had ended yesterday’s trading session at 1.3563. Immediate support for the greenback is likely seen around the 1.38 level.

Data from the Lloyds Bank subsidiary Halifax and IHS Markit showed that UK house prices logged the slowest growth in the current sequence of increase that started in July.

House prices rose 0.2 percent from November, when prices were up 1 percent. This was the slowest increase since July.

The U.S. currency reached 103.60 against the yen, falling by 0.5 percent from over a 3-week high of 104.09 logged at 3:00 am ET. The pair had closed Thursday’s deals at 103.77. Further fall in the currency may challenge support around the 100.00 level.

Data from the Ministry of Internal Affairs and Communications showed that Japan household spending increased 1.1 percent on year in November – coming in at 278,718 yen.

That beat expectations for a decline of 1.5 percent following the 1.9 percent increase in October.

The greenback depreciated to a 2-day low of 1.2659 against the loonie, pulling away from a high of 1.2708 registered at 3:00 am ET. The greenback was trading at 1.2690 against the loonie at yesterday’s close. The greenback is likely to challenge support around the 1.22 level.

The greenback slid to 0.7799 against the aussie, following a gain to 0.7740 at 8:15 pm ET. The greenback was worth 0.7767 per aussie at Thursday’s New York session close. Extension of downward trading may see the greenback finding support around the 0.82 region.

The greenback eased off from its Asian session’s high of 0.7239 versus the kiwi, with the pair worth 0.7281. At Thursday’s close, the pair was valued at 0.7254. Should the greenback continues its downtrend, 0.74 is likely seen as its next support level.

The U.S. consumer credit for November is due out in the New York session.


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