Investors flocked to higher-yielding assets on Monday after strong U.S.jobs data on Friday lifted confidence – driving up Asian stocks and the Australian dollar.
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Fed-funds futures, a popular vehicle for traders and investors to bet on the Fed’s policy outlook, showed that the odds for the Fed to raise rates by the September meeting were at 18%, up from 12% before the labor data, according to CME.
“The market is pricing in 100 percent probability of a cut at the Reserve Bank of New Zealand’s meeting”, Marshall Gittler, head of investment research at FXPrimus, said in a note.
USA nonfarm payrolls rose by 255,000 jobs in July, way above economists’ median forecast of an increase of 180,000 while payroll growth in June was also revised up to 292,000, with hiring broadly based across the sectors of the economy. Economists polled by Reuters had forecast July payrolls would increase by 180,000.
“The robust USA labor market data raise the chances for monetary policy normalization by the Fed, but uncertainties for the US remain high as well”, wrote strategists at Barclays. This channel boundary held, suggesting a bearish bias for this week’s trading and an eventual test of the lower channel line, which is now near the 1.0800 level, corresponding to the approximately area of the lows established in late January and early March 2016. The dollar, which unchanged against the euro, gained 0.61% against the Japanese currency to ¥102.44. Friday’s retail sales report for July will be the next major USA economic focus.
Among other currency pairs, the euro was at $1.1102 midday from $1.1090.
The dollar index, which gauges the greenback against a basket of six major rivals, erased earlier slight losses and edged up 0.1 percent to 96.474.DXY.
Despite a cut in interest rates last week, the Aussie was the best performing currency in Asia as its relatively higher interest rate appeal and AAA credit ratings strengthened its appeal.
In commodities, spot gold XAU= was up 0.05 percent to $1,335.80 an ounce, a low not seen since July 29.
On Monday, the greenback rose to 102.01 yen from 101.79 yen in NY and 101.08 yen in Tokyo earlier Friday.
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“In terms of relative monetary policy, the US dollar will have more upside against the euro and the pound because the Bank of England is easing and the risk is ECB (European Central Bank) eases more”, Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia, told Bloomberg News.
