US Dollar Takes a Beating after Unexpected Slowdown in Job Creation by MCarmen Martinez - Profesora - Bilingüe - Inglés

US Dollar Takes a Beating after Unexpected Slowdown in Job Creation

The US dollar plummeted against most major currencies after job data on Friday showed that the largest economy in the world only managed to create 266K non-farming jobs.

Expectations had been for this month’s data to show a much larger increase in job creation, more like 978K, which would have been a strong increase from April’s data at 770K. The dollar lost 0.84% on the day against the Euro, 0.66% against the British pound, and 0.41% against the Yen. The US dollar aggregate index lost 0.81% showing a sharp drop for the reserve currency across the board.

The attention now turns to Wednesday’s inflation data. The Consumer Price Index is expected to show an increase in inflation from last month’s data at 1.6% to 2.3%.

Higher inflation would indicate the US Federal Reserve Bank may begin a more restrictive monetary policy. This would be necessary to keep their mandate of 2% inflation.

Monetary tightening may give dollar bulls some room to reverse this Friday’s bear trend for the currency. However, it may take more than one set of data for the Federal Reserve to begin making comments that would give US dollar bulls some fuel.

In Europe and the UK, both economies are still battling with coronavirus restrictions, although the UK has taken steps to revert to some kind of normality along with some EU states. This may give their currencies some room to reach higher levels. Yet, the full extent of the loosening of lockdown restrictions still remains to be seen.

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