The
dollar index (DXY00) on Thursday rose +0.075 (+0.08%). Sep euro-fx futures
(E6U0) closed down -0.0018 (-0.16%), and EUR/USD (^EURUSD) fell -0.0014
(-0.12%). Sep yen futures (J6U0) closed down -0.09 (-0.10%), and USD/JPY
(^USDJPY) rose +0.08 (+0.07%).
The
dollar index on Thursday recovered from a 1-week low and moved higher after
U.S. Jun non-farm payrolls rose more than expected. The dollar also saw
strength in pandemic concerns and weakness in EUR/USD tied to weak Eurozone
inflation pressures.
U.S.
stock indexes on Thursday moved higher and curbed dollar demand on a
stronger-than-expected U.S payroll report. U.S. Jun non-farm payrolls rose +4.8
million, stronger than expectations of +3.23 million, and the largest increase
since the data began in 1939. Also, the Jun unemployment rate fell by -2.2
points to 11.1%, showing a stronger labor market than expectations for a
decline to 12.5%. U.S. Jun average hourly earnings fell -1.2% m/m, weaker than
expectations of -1.0% m/m, and the biggest decline since the data series began
in 2006.
Other
U.S. economic data on Thursday was negative for the dollar after U.S. weekly
initial unemployment claims fell -55,000 to 1.427 million, showing a weaker
labor market than expectations for a larger decline to 1.350 million. Also,
weekly continuing claims unexpectedly rose +59,000 to 19.29 million, showing a
weaker labor market than expectations for a decline to 19.00 million. Besides,
the U.S. May trade deficit of -$54.6 billion was wider than expectations of
-$53.2 billion, and the biggest deficit in 17 months.
The
dollar recovered its losses Thursday and moved higher on increased dollar
liquidity-demand tied to concern about the worsening U.S. pandemic. New virus
infections in the U.S. on Wednesday climbed by a record of 51,374, up +1.95%
from Tuesday. Confirmed cases of the virus have risen above 10.834 million
globally, with deaths exceeding 519,000.
Big
Picture Dollar Factors: Bullish factors for the dollar index include (1)
safe-haven demand for dollar liquidity as the stress in the global financial
system encourages flight into the world’s reserve currency, and (2) the influx
of capital from overseas investors fleeing from negative-yielding debt. Bearish
factors include (1) the outlook for the Fed to keep the funds’ rate near zero
at least through 2022, (2) the Fed’s extraordinary blast of monetary stimulus
in response to the pandemic, (3) the severe U.S. and global economic damage
being caused by the coronavirus pandemic, which is dovish for Fed policy, (4)
trade tensions and Washington political uncertainty, and (5) the wide U.S.
budget and current account deficits.
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