The U.S. Dollar Index (DXY) is giving up early gains today after the U.S. economy added 216,000 new jobs in December. The Street had pegged an addition of 175,000 jobs for the month.
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Further, the unemployment rate remained steady at 3.7%, partially dashing hopes for rapid rate cuts this year. Additionally, earnings have fared better than anticipated so far, while November factory orders came in at +2.6% versus expectations of +2.1%. While DXY has gained nearly 0.9% this week, the 10-year bond yield has surged about 2.5%.
The latest macro data means traders will have to scale back expectations of a rate cut in March. As factory activity in Japan expanded, the U.S. dollar has seen steady gains against the yen over the past two weeks. Further, a contraction in manufacturing activity in Australia is putting pressure on the Australian dollar. Manufacturing PMI in the country has now seen three consecutive prints below 50.
In contrast, better-than-expected Services PMIs in the U.K. and the Eurozone are lending strength to the Sterling and the Euro. The latest minutes from the U.S. Fed’s December meeting indicate a cautious stance about an overly tightened monetary stance. However, the data did not shed any light on the possible timeline of any rate cuts.
The stronger-than-expected jobs market and tapering expectations of rapid rate cuts indicate strength in the U.S. dollar over the coming sessions. Immediate support for DXY can be expected at the 101.65 level.
Source: TradingView
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