Daily Wrap Up 04 February 2022

4 Feb 2022 04:44 PM

Strong US jobs report fuels dollar rally

The US dollar is driving higher this afternoon following the surprisingly strong US non-farm payrolls report. Last month, 467,000 jobs were added and that comfortably topped forecasts of 110,000. Some economists were even expecting a negative reading, so the stellar number was a pleasant surprise. In addition to that, last month’s figure of 199,000 was revised up to 510,000. Average earnings came in at 5.7%, up from 5% in the previous update. It is possible that employers have had to offer rise wages to attract staff. When workers earn more, they typically spend more, and that should bode well for the economy. It wasn’t all good news, as the unemployment rate nudged up from 3.9% to 4%. Overall, it was a very good jobs report so that has led to renewed chatter the Fed might hike interest rates several times this year. The US interest rate futures market is implying more than five hikes by the Fed this year. The Dow Jones, like the FTSE 100 and the DAX, is in the red as the prospect of numerous rate hikes from the Fed is back at the forefront of traders’ minds. The US 10-year yield is trading above 1.93% - the highest mark in two years, which underlines that the bond market is expecting interest rates to be lifted.

The US dollar index is up 0.15% thanks to the impressive jobs data. Keep in mind, the dollar was clobbered yesterday as the European Central Bank failed to rule out the possibility of hiking rates this year, and that led to the greenback falling roughly 0.7%. When you consider yesterday’s massive fall in the dollar, and today’s bullish jobs data, the upward move in the greenback isn’t that big. AUD/USD is down over 1% on the day as the wider risk-off feeling in the markets is hurting the Australian dollar. Metals such as copper and platinum are in the red, hence the excessive fall in AUD/USD. Gold is hovering around the $1,800 mark as the flight-to-quality play is helping the asset. USD/CAD is up over 0.8% due to the robust US employment data, and the poor Canadian jobs update. Canada’s unemployment rose from 5.9% to 6.5%, and the employment change showed that 200,100 jobs were lost in January.

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