The May U.S. jobs report put the brakes on a 4-week winning streak for the dollar against the yen as forex players priced out a June rate hike and left a July tightening at less than 50%. USD/JPY went into a tailspin early Friday on a knee-jerk reaction to a 38,000 gain in non-farm payrolls, considerably below estimates for a 158,000 gain. Even the 4.7% jobless rate was not enough to resuscitate the dollar as it was attributed to fewer workers in the labor market. USD/JPY blew through key supports including the 50% retracement of the move from May 3 to May 30, trendline support at 108.49 and even 107.00. Once the dust settled and the dollar steeled itself just above 106.50, it ended up losing 3.3% in value to close at 106.63.
The euro also closed the week higher against the dollar for the first time in five weeks despite heavy losses in the joint European currency following the European Central Bank meeting on Thursday. Although the ECB left interest rates unchanged, and raised its GDP forecast for 2016, in a press conference following the meeting, ECB president Mario Draghi left open the possibility for further rate cuts as a result of naggingly low inflation. EUR/USD ended Thursday in the red, but was catapulted to a three-week high of 1.1354 in the wake of the May U.S. jobs data, putting in its best performance since March 10 when the ECB cut interest rates but Draghi ruled out any further rate cuts. EUR/USD ended the week 0.2% higher at 1.1352.
Sterling was plagued by Brexit worries again this week as recent polls showed Brits in favor of leaving the European Union. Repeated warnings from UK politicians, and even JP Morgan CEO Jamie Dimon, of the economic cost of leaving the EU didn’t alter the polls, but it did weigh on the pound which lost 0.6% in value against the dollar to close on Friday at 1.4517, ending a two-week winning streak.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Courtesy : nasdaq.com