Dollar is Unable to Overcome Post Nonfarm Payrolls Weakness

The dollar declined in early European trade on Tuesday, continuing its post nonfarm payrolls weakness. Other currencies, Australian and New Zealand dollars, rose amid signs that these economies are recovering strongly.

The dollar started to decline on Friday, as the jobs report wasn’t sufficiently strong to push the Federal Reserve into tapering its asset-buying anytime soon.

U.S. interest rate markets slightly softened their position on early Fed tightening as a result of the jobs data. That tone is likely to continue until Wednesday’s release of minutes of the Federal Open Market Committee’s meeting. In June, during the FOMC meeting, officials brought forward their expectations of when interest rates will be raised in 2023.

At 2:55 AM ET, the dollar index, which tracks the U.S. currency against a basket of six other main currencies, fell 0.4% to 92.028.

USD/JPY dropped 0.1% to 110.81, EUR/USD gained 0.3% to 1.1893, while GBP/USD added 0.3% to 1.3893. British Prime Minister Boris Johnson’s announcement helped to boost the British pound. On Monday, he announced that all Covid restrictions are expected to be lifted in England in two weeks’ time.

The Australian dollar and the central bank

The Australian dollar gained 0.8% against the greenback to 0.7590 after the Reserve Bank of Australia’s decision. The Reserve Bank of Australia announced a cropped extension of its quantitative easing program. The central bank stated that it expects to keep interest rates at a record low until 2024.

The bond purchase program continues to play an important role when it comes to supporting the country’s economy. The central bank will continue to purchase bonds due to two major factors. The Reserve Bank of Australia wants to reach its inflation and employment objectives. But, the central bank decided to respond to the stronger-than-expected economic recovery and improved outlook by adjusting the weekly amount purchased.

Additionally, the New Zealand dollar added 1.1% against the greenback to 0.7099. The kiwi benefited from a survey published by the New Zealand Institute of Economic Research. This survey showed more companies expect an improved business climate, bringing forward expectations of the country’s first interest rate hike to the end of the year.

Oil prices rose after the group of top producers failed to come up with an agreement to increase output levels. Thus, currencies that are sensitive to oil prices strengthen their positions. USD/NOK dropped 0.4% and USD/CAD fell 0.3% to 1.2306.