US Job Data Boosts Dollar’s Rebound, Causes Euro to Dip

The week started with the US data jobs hitting the market. As expected, the release affected the market, boosting the US dollar’s rebound and the euro’s fall. The primary reason behind the outcome lies in traders’ belief that the data could lead to quick rate hikes from the Fed.

Lee Hardman, the MUFG analyst, talked about the development. According to Lee, Christine Lagarde is clearly signaling the chances of a quick rate surge in the foreign exchange market. The euro has underperformed over the past several months, backed by the expectations of the ECB maintaining a loose policy. 

It also relied on the belief that the Fed and the BoE will tighten their policies. Lee added that market participants are more likely to reach a short euro funding position. 

Although the European currency only fell 0.2%, its figure of 1.1425 dollars caused regulated brokers to switch to the dollar. The move was natural as the euro’s recent hike was fueled by the ECB’s help. Ever since it helped the eurozone rate surge, the bond yields skyrocketed too.

Martins Kazaks, an ECM policymaker, pushed back against everyone’s speculations for a rate surge during an interview in July. Martins stated that the bank might end its stimulus program quicker than planned. However, it is highly unlikely that the institution will grow its interest rate.

The US dollar fell 0.2 percent to 114.94 Yen. Although the pound fell 0.1 percent to $1.3511, both the currencies stayed in the center of their previous ranges.

According to Mark Haefele, CIO at UBS Global Wealth Management, the euro will decline to $1.10 by the end of the year, while the dollar would gain against the Swiss franc, ending the year at 0.98 francs per dollar, up from 0.92 as of now.

The dollar gained some support on Monday, aided by rising Treasury rates in the United States. The dollar index rose 0.1 percent to 95.483, up from 95.136 last week before the employment report.

The safe haven found backing in the shape of the US Treasury Yields that surged after the release of jobs data this Friday. As the markets have come to one-in-three chances, the Federal Reserve could surge by a whole 50 basis points in March. Many even believe that the rate could reach 1.5% by 2022’s end.