- The US has gained no fewer than 379,000 jobs in February.
- Dollar advances are set to continue as hiring as a vaccine-led recovery unfolds.
- Fed Chair Powell's reluctance to counter the bond rout is already underpinning the dollar.
Big surprise – albeit not for all – in the US Nonfarm Payrolls report for February. The world's largest economy gained 379,000 jobs, around double the early estimates of 182,000. Moreover, it is topped off by upward revisions worth 159,000. In the private sector, around 465,000 new positions were created, also encouraging news.
This is good news for the dollar – Ten-year bond yields leaped to a new one-year high of 1.622%, surpassing the previous spike level, and pushing the dollar higher. EUR/USD is struggling to hold onto 1.19 while GBP/USD already took a dip under 1.38. USD/JPY is extending its relentless rise above 108.50 and gold extends its meltdown.
More may be in store and not only because the "trend is your friend".
The NFP has been released on the backdrop of Federal Reserve Chair Jerome Powell's comments on Thursday. "Caught my attention" was the only gesture Powell offered to the sell-off in bonds that has sent stocks falling and the dollar rising. The Fed sees inflation increases as transitory, financial conditions as still accommodative and the task of bringing ten million Americans back to work as daunting.
Will this NFP change the Fed's mind in any direction? Figures perceived as weak could have triggered an expansion in the bank's bond-buying scheme, thus weakening the dollar. Data seen as pointing to robust recovery may trigger concerns of rate hikes and boost the greenback.
As the latter scenario has unfolded, King Dollar may feel more comfortable on its throne. The Fed seems content with its current policy, and unlikely to budge – at least not until its next meeting on March 17.
All in all, the wait for the NFP has caused a pause in dollar gains, and now the greenback has a new green light for gains.
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