US dollar traders breathed a collective sigh of relief as trading got underway in Asia on Monday morning.
A positive jobs data release from the country last Friday has led to an increased expectation that the country’s central bank, the Federal Reserve, will hold off on an interest rate cut when it meets at the end of July.
The nonfarm payrolls release, which shows the number of jobs available outside of the agricultural sector in any given period, rose sharply to 224,000 on Friday.
This was significantly higher than the prediction by many of 160,000. It was also the best performance of this metric in almost half a year.
The US dollar index went up to 97.443 once the data was released on Friday, which represented a two-week high point.
This rise came in part from increased confidence that the Fed will avoid a cut in rates.
The jobs news makes it highly unlikely that the predicted 50 basis point slash in interest rates which some had foreseen is actually going to go ahead.
However, the dollar index found itself moving very little on Monday morning.
Elsewhere, the British pound sterling had a difficult day as last week came to a close. It experienced the opposite effect to the dollar, with assumptions that the Bank of England will cut rates now dominant.
This perception came after a range of difficult data releases for the British economy. Against the US dollar, the pound went down to $1.2481 in the GBP/USD pair.
In addition to a dominant dollar and a series of negative economic data releases, Britain is also suffering from the effects of political instability.
Prime Minister Theresa May, who failed to get her negotiated Brexit deal through the country’s parliament, is stepping down – and the race to succeed her, between Boris Johnson and Jeremy Hunt, is proving fraught.
The outcome of Brexit is still unknown, and this political uncertainty has hampered prospects for the pound in recent months.
The Japanese yen also saw problems late last week. In its pair with the US dollar, the greenback was by far the dominant one – and at one particular stage reached 108.640.
The single European currency also saw a drop. Demand for industrial materials in Germany plummeted over the course of the month of May – and this was followed by a suggestion from the German government that this trend was unlikely to resolve as the year proceeded.
The euro was last recorded at $1.1226 in its pair with the US dollar.
Over in China, the offshore yuan was celebrating the end of a positive month. It went up by over half a percentage point in the CNY/USD pair in June of last year, which marked its first month-on-month gain since close to the start of 2019.
It started to look more and more likely that this would be continued after the People’s Bank of China said that Chinese forex reserves had gone up by almost $19 billion US dollars.