Weak Job Growth Triggers US dollar Selloff
The US dollar weakened on Monday, as market participants absorbed last week’s disappointing payrolls report.
US employers added 74,000 payrolls last month, much lower than the most pessimistic of forecasts. While seasonal volatility and bad weather were partly to blame for last month’s soft reading, the broad-based declines suggest US recovery was losing momentum toward the end of the fourth quarter. This in-turn has dampened the short-term outlook on the US economy, fueling uncertainty about the pace and timing of Federal Reserve stimulus cuts.
The Fed pared asset purchases by $10 billion last month in response to the strongest pace of job growth since the first quarter. Economists had forecasted 197,000 job gains last month, according to a median estimate compiled by Bloomberg.
The US dollar fell nearly 0.2 percent to 80.53 against a basket of its major competitors. The US currency fell to fresh four-week lows against the Japanese yen, shedding 120 pips to 102.9 yen. The dollar pared gains against the Canadian dollar, falling half a percent to 1.0855 CAD. Down-under, the Australian dollar hit a four-week hike against the greenback, while the New Zealand dollar reached its highest level in eight weeks.
The euro tread water against the US dollar amid data showing Italian industrial production unexpectedly rose 1.4 percent in November. Meanwhile, deflation in Greece eased from 2.9 percent (a record high) to 2.2 percent in December, official data showed.
The British pound fell 100 pips against the greenback, as investors look ahead to Tuesday’s UK consumer inflation report. Annualized consumer inflation in December was unchanged at 2.1 percent, according to estimates. The GBPUSD pair was trading at 1.6382 at the end of the North American session.
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