US dollar dips against euro as jobs gains offset by negative revisions

THE US dollar gave back earlier gains against the euro but stayed stronger against the yen on Friday (May 5) after jobs gains and wage growth for April beat economists’ forecasts but had downward jobs revisions for March. Employers added 253,000 jobs, beating economists’ forecasts for a 180,000 gain. March data was revised lower to show 165,000 jobs added instead of 236,000 as previously reported.

“The headline number is probably not as strong as it looks given the backward revisions,” said Vassili Serebriakov, an FX strategist at UBS in New York. The initial move up in the greenback was likely partly due to investors shorting the currency, or betting it would fall, covering their positions, he added.

The dollar has fallen from a 20-year high last September as investors adjust for the likelihood that the Federal Reserve is at or near the end of its tightening cycle, while peers including the European Central Bank have gotten more hawkish. Investors are pricing in the likelihood that the Fed will cut rates in the second half of this year. But, while the economy is slowing, there are still pockets of strength, which makes investors hesitant to get overly bearish on the dollar.

Fed funds futures traders are pricing in around 75 basis points of cuts by year-end. The Fed raised rates by 25 basis points to 5 per cent to 5.25 per cent on Wednesday and dropped from its policy statement language saying that it “anticipates” further rate increases would be needed. The euro fell to US$1.0967, before bouncing back to US$1.1026, up 0.11 per cent. The greenback gained 0.40 per cent to 134.79 yen.

Technical analysts at JPMorgan noted on Friday that there are bearish divergences on the daily euro-US-dollar chart and that the single currency’s gains have stalled, but the rally is “not decisively over.” The bank said that if the euro sees sustained weakness below the US$1.0909 and US$1.0831 levels, it would confirm a short-term trend reversal, while a drop below US$1.0762 “would imply a more significant trend reversal is in the making”. The euro also fell against sterling to 87.11 pence on Friday, the lowest since Dec 20. REUTERS