Dollar index, which measures the dollar’s performance against a basket of other currencies, fell by 0.5% to 101,817 points at 1:40 pm GMT on Friday.
The sharp decline in the index came after the monthly Nonfarm Payrolls (NFP) report for July was released by the Bureau of Labor Statistics.
The US economy added about 187K jobs in July which was below expectations of 200K. This figure also came at the lowest level since January of the year 2021.
This figure comes after the initial jobless claims figures for last week, which were issued on Thursday and came at 227K claims, in line with analysts’ expectations, but below the average of the last four weeks average, which was at about 228K.
Also, the non-farm payrolls numbers came after the services and ISM manufacturing PMI figures for July came in below expectations.
Samer Hasn, Market Analyst and part of the Research Team at XS.com said, “All in all, the previous numbers we saw this week reinforce the markets hypothesis about the end or near the end of the interest rate hike cycle as inflation continues to subside.
“On the other hand, we saw today, in addition to the new NFP figures, the unemployment and the average hourly wage figures.
“The unemployment rate came in at 3.5%, which was below expectations of 3.6%. Also, the average hourly earnings increased by 0.4% in July compared to last June, which also came above expectations of 0.3%. Also, earlier this week, we saw ADP’s Non-Farm Payrolls figure adding 324K jobs in July which was well above expectations of 189K.
“With those figures, in conclusion, it seems that the markets are still pricing in not raising interest rates at least at the next meeting of the Fed next September. As the markets are likely to keep the interest rate unchanged at a probability of 86.5% in the September meeting.
“As for the bond markets, we witnessed a severe decline in returns after the announcement of the labor market figures for today. As the yield on two-year Treasury bonds, which is sensitive to expectations of short-term interest rates, fell to 4.795% at around 1:30 pm, the lowest level since last July 20.
“On the technical side, and on the two-hour time frame, the Dollar Index fell below the previous resistance area at 102.153-102.046, and is heading to test 101.530, along with the SMA-100.
“While a breach below those levels as well, might draw the sellers’ attention to more lower levels at 101.155 and 100.785 points. On the other hand, the index’s restoration of previous resistance levels and stability above them may turn attention back towards 102.842 again.“