US Dollar declines despite strong labor data

  • Tuesday’s highlight was the US Bureau of Labor Statistics reporting on strong JOLTs Job Openings figures for February.
  • Markets await additional data to guide easing cycle expectations, widely expected to commence in June. 
  • Events on the horizon this week include Nonfarm Payrolls, Average Hourly Earnings, and Unemployment rate.

The US Dollar Index (DXY) trades at 104.95 with mild losses. The Federal Reserve (Fed) and economic data are giving signals of a solid US economy, which made markets back off on being fully confident of a June rate cut. Labor data this week will continue modeling those expectations.

The US economy remains resilient as the Federal Reserve adopts a cautious approach under the leadership of Powell. Despite forecasts indicating higher inflation, the Fed is avoiding drastic reactions to temporary price spikes. The potential beginning of a monetary easing phase in June is contingent upon future economic data. Several Fed speakers will be on the wires on Tuesday.

Daily digest market movers: DXY loses ground despite strong labor data


  • The Bureau of Labor Statistics (BLS) in the US published the Job Openings and Labor Turnover Survey (JOLTS) for February, which showed 8.75M job openings.
  • This figure surpassed January’s adjusted count of 8.74M and overtook the market expectation of 8.74M. 
  • As for now, the market foresees a 63% probability of the first 25 bps rate cut in June, which is still contingent on incoming data.
  • US Treasury bond yields are mixed on Tuesday with the 2-year yield at 4.70%, indicating slight downward movement. In contrast, 5 and 10-year yields at 4.34% and 4.36%, respectively, show minor increases.
  • Nonfarm Payrolls, Average Hourly Earnings, and Unemployment Rate data will dictate the pace of expectations and the US Dollar for the short term.

DXY technical analysis: DXY bulls take a breather but retain control

On the daily chart, the Relative Strength Index (RSI) is on a negative slope, although still in positive territory, implying a possible weakening of buying momentum. This may be a hint that the bulls are taking a breather at this point after driving the index to its highest level since mid-February. The Moving Average Convergence Divergence (MACD) shows decreasing green bars, further indicating that the bullish momentum seems to be losing steam.

Despite showing a negative outlook in the short term, the pair is operating above its 20, 100, and 200-day Simple Moving Averages (SMAs). This suggests that the overall trend remains predominantly bullish.



Employment FAQs

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.


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