Dollar Ekes Out Weekly Gain, Euro Sets Monthly High After Jobs

  • Buy-the-rumor, sell-the-news as bloated NFP hopes dashed
  • Drop in Treasury yield boosts some emerging-market currencies

Jobs Report Sets Stage for Expected Fed Rate Hike

The dollar all but erased its gain for the week while the euro rose to its highest since early last month after the February U.S. employment report failed to surpass elevated expectations or put a dent in rising sentiment toward the shared currency.

The greenback dropped even though non-farm payrolls rose 235,000 versus estimates for 200,000 and average hourly earnings rose at a 2.8 percent annual rate, cementing market expectations that the Federal Reserve will raise rates by 25 basis points when it meets next week.

  • Expectations for strong jobs figures had strengthened this week after the ADP Institute reported robust employment growth Wednesday, and the dollar fell because the market was fully priced for strong data, said Shaun Osborne, chief FX strategist at Bank of Nova Scotia in Toronto. “I don’t think the USD will drop too far, though,” because there’s still a risk that the Fed will signal more aggressive tightening cycle at its March meeting.
  • At the same time, the euro held gains vs all but one of its G-10 peers. It was still underpinned by Thursday remarks from ECB president Mario Draghi, who said that the risks to the euro area economic outlook were becoming more balanced, a slightly rosier tone than he has used recently. The euro extended gains after a report that the ECB discussed whether it could raise rates before ending QE, a topic Draghi didn’t discuss Thursday.
  • The dollar is set to eke out a weekly gain of ~0.2%, its second straight, even after falling back from its highest level since Jan. 20.
  • USD/JPY trading near 114.90 after dropping to a fresh low 114.76 from a session high at 115.51 set just ahead of the jobs data. The pair tumbled as the 10-year Treasury yield declined from the 2.61% seen before the employment report; USD fell below 115.00, tripping stop-loss sell orders in a zone to 114.80 from weak longs, a trader in New York said; option-related offers above 115.50 and technical resistance from the Jan. 19 high at 115.62 combined to cap the pair, traders said.
  • EUR/USD rose as high as 1.0687, its highest since Feb. 9, after trading near 1.0600 pre-NFP; offers to sell EUR, stacked ahead of 1.0680, have helped slow gains, traders in Asia, Europe, London and Toronto said.
  • Underscoring the shift in sentiment against the dollar, the greenback fell more than 1% vs TRY, ZAR, MXN and BRL
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