U.S. dollar sold off, euro hits 10-week high

NEW YORK, New York – The U.S. dollar fell sharply in New York trading on Friday as speculation intensified that the Federal Reserve will not only abandon its tightening of monetary policy, but will soon start lowering interest rates.

This despite the robustness of the economy.

A Labor Department report revealing nonfarm payrolls saw an increase of 75,000 jobs last month. This was not a positive as the expectation was for an increase of 185,000 jobs. The lesser number is an indicator that the economy is not doing as well as thought.

“The jobs report indicates there’s some weakness but the economy does remain relatively robust at this point,”  Peter Jankovskis, co-chief investment officer at OakBrook. Investments LLC in Lisle, Illinois told Reuters Thomson on Friday.

A slower economy does lead to lower interest rates, and this is what Wall Street focused on, together with hints in the latter part of the week from Federal Resreve members including Chairman Jerome Powell.

“Right now the market is willing to accept disappointing growth in exchange for the prospect of lower rates,” Jack Ablin, chief investment officer at Cresset Capital Management in Chicago told Reuters Thomson Friday. “We’re addicted to low rates and we’re willing to forsake our economic growth in exchange for those low rates.”

The EUR/USD pair rose to a 10-week high on Friday, closing out the New York session around 1.1333.

Concern about the impact of U.S. President Donald Trump’s decision to impose tariffs on all Mexican goods weighed on the dollar as well. Despite last-minute negotiations between the two countries, and despite ‘progress’ initially reported, there has been no deal and tariffs will come into force on Monday. After the markets had closed on Friday however there was a report that a deal had been agreed between the U.S. and Mexico which would mean the tariffs now will not come into effect.

Next week, the macroeconomic calendar will add little, the main focus being the U.S. Federal Reserve’s monetary policy decision later this month.

The British pound advanced to 1.2737 by the close on Friday. The Japanese yen jumped to 108.18, while the Swiss franc firmed to 0.9877.

The Canadian dollar rose sharply to 1.3266.

The Australian dollar was modestly higher at 0.7000. The New Zealand dollar edged up to 0.6665.

(Photo Credit: World First Blog).

Published at Sat, 08 Jun 2019 00:48:00 +0000

Source: U.S. dollar sold off, euro hits 10-week high.

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