Jobs Data Limits Dollar's Losses Amid Tariff, PMI Shocks

(RTTNews) - A larger-than expected addition to non-farm payrolls curtailed the dollar's losses in a week marked by global chaos on the trade front and weak economic data from the U.S. The week ended April 4 witnessed the U.S. Dollar inter alia slipping against the euro, the Japanese yen, the Canadian Dollar, the Swedish Krona, and the Swiss franc but gaining against the British pound and the Australian dollar. The Dollar Index closed almost a percent lower in a week's time.

The Dollar Index (DXY), a measure of the Dollar's strength against a basket of 6 currencies slipped 0.98 percent during the week ended April 4. The DXY which had closed at 104.04 on the last Friday of March, finished trading at 103.02 on the first Friday of April. During the week, the index plunged from the high of 104.39 recorded on Monday to a 6-month low of 101.27 recorded on Thursday.

Concerns about economic activity in the U.S. were renewed after the ISM manufacturing PMI declined to 49 in March from 50.3 in February, missing market forecasts of 49.5. Also, data released by the U.S. Bureau of Labor Statistics on Tuesday showed the number of job openings decreasing to 7.568 million in February from an upwardly revised 7.762 million in January and below market expectations of 7.63 million.

Market sentiment was heavily impacted in the aftermath of the sweeping reciprocal trade tariffs announced by President Donald Trump late on Wednesday. Fears of the tariffs jeopardizing economic growth and fueling inflation weighed heavily on market sentiment across asset classes and regions.

The data release on Thursday that followed showed the ISM Services PMI falling sharply to 50.8 in March from 53.5 in February and way below forecasts of 53. The reading revealed the softest expansion in the services sector since June of last year.

Amidst concerns about a recession in the U.S. and renewed Fed rate cut expectations, the Dollar Index dropped to a 6-month low of 101.27 on Thursday.

In the data released on Friday morning, the U.S. Bureau of Labor Statistics showed an addition of 228 thousand to non-farm payrolls in the month of March, versus 135 thousand that the markets had expected. This compared with the previous month's revised reading of 117 thousand. The unemployment rate which was anticipated to be steady at 4.1 percent however unexpectedly increased to 4.2 percent. The robust jobs data helped restore sentiment in favor of the greenback.

Fed Chair Jerome Powell's comments on Friday that the trade tariffs were highly likely to raise inflation, and slow economic growth, also supported the Dollar's rebound on Friday. The DXY eventually closed the week's trading at 103.02.

In the midst of the mayhem in markets that followed the sweeping reciprocal trade tariff announcements by the U.S., the Euro surged 1.2 percent against the Dollar. During the week ended April 5, the EUR/USD pair rose to 1.0955, from 1.0827 a week earlier. The pair ranged between $1.0778 and $1.1146 during the week. Data released during the week had showed annual consumer price inflation in March in the region declining to 2.2 percent versus market expectations of 2.3 percent. The week ended April 4 witnessed the pound sterling slipping 0.37 percent against the dollar despite a comparatively lower tariff level imposed by the U.S. on U.K. The downward revision in the S&P Global U.K. Services PMI for March to 52.5 from the preliminary reading of 53.2 aided the sterling's decline. Concerns about inflation and the retaliatory measures by the U.K. also weighed heavily on the sterling. The sterling, which had closed at $1.2938 on March 28 dropped to $1.2890 by April 4. The GBP/USD pair traded between a low of 1.2852 and a high of 1.3209.

The Aussie plunged against the U.S. Dollar during the week ended April 4 amid mounting fears of a tariff-driven global recession. Sentiment was also dampened by the higher tariffs imposed by U.S. on Australia's key trading partners such as China, Japan, and South Korea. The AUD/USD pair traded between a high of 0.6390 and a 5-year low of 0.5986. The slippage for the pair during the week was a whopping 3.9 percent, from 0.6287 on March 28 to 0.6041 on April 4. The Reserve Bank of Australia had also during the week, held rates steady as widely expected.

Safe-haven Japanese yen rallied during the week ended April 4 amid the global turbulence triggered by massive tariffs imposed by the U.S. The USD/JPY pair which had closed at 149.81 on March 28, decreased to 146.90 in a week's time. The pair ranged between 150.49 and 144.55 in a week that saw the U.S. imposing heavy trade tariffs on Japan.

Amidst the worries of a recession triggered by the massive tariffs imposed by the U.S., the possibility of a Fed rate cut has emerged as a likely possibility. The CME FedWatch tool that tracks the expectations of interest rate traders currently shows expectations of a quarter point rate cut by the Fed in the May FOMC at 43.8 percent. It was 33.3 percent a day ago, 14 percent a week earlier and 36.2 percent a month ago.

Also, on the horizon are the release of the FOMC minutes on Wednesday and the inflation updates from the U.S. on Thursday and Friday. While there is persisting turbulence in global markets, the Dollar Index has rallied to 103.14. The EUR/USD pair has edged up to 1.0960 whereas the GBP/USD pair has slipped to 1.2833. The AUD/USD pair has increased to 0.6110. The yen's weakness has lifted the USD/JPY pair to 147.55.