The U.S. dollar declined to a more than two-month low against main peers on Monday after a weak U.S. employment report prompted investors to change expectations for higher interest rates. The focus now shifted to inflation data due this week. The world’s largest economy created a little more than a quarter of the jobs economists expected. Moreover, the unemployment rate unexpectedly ticked higher, pouring cold water on speculation regarding runaway inflation.
The dollar index stood at 90.259, after declining to as low as 90.128 for the first time since February 26 earlier in the session. The British pound benefited from the situation, and it was the biggest winner among most-traded currencies.
The pound added 0.5% to reach its highest point since February 25. The British pound strengthened its position despite the position of the Scottish National Party (SNP). It could take years to organize another independence referendum due to various factors. The party’s leader Nicola Sturgeon stated that another referendum was inevitable. Her party won the majority in the Scottish parliament.
Also, the euro gained 0.1% to $1.2172, earlier touching the highest point since February 26 at $1.2177.
The greenback rose 108.865 yen but remained not far from its lowest level since April 27.
Another dollar this time Australian traded close to a more than two-month high at $0.7847. The Canadian dollar rallied to a fresh 3-½ year high of $1.2111.
Dollar, jobs report, and Jerome Powell
U.S. job growth slowed last month, likely affected by shortages of workers as well as raw materials. Massive government aid and rapidly improving public health fueled an economic boom.
The report released showed a plunge in temporary help jobs, which is a harbinger for future hiring. The latest report sparked a debate about the generosity of unemployment benefits. As a reminder, the enhanced jobless benefits, including a government-funded $300 weekly supplement, pay more than most minimum wage jobs. The benefits were extended until early September as part of the COVID-19 pandemic relief package approved in March. Two states, Montana and South Carolina are ending government-funded pandemic unemployment benefits for residents in June.
Even before the big payrolls miss, Fed Chair Jerome Powell argued the U.S. labor market is far short of where it needs to be to start talking of reducing asset purchases. He also noted that a near-term spike in inflation will be transitory.