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    US dollar declines as job growth slows 

    July 9, 2024

    Key points: 

    • US employers added 206,000 new jobs in June, above estimates of 189,000 by Wall Street but a decline from the May jobs data. 
    • Even so, the US dollar index has declined for seven consecutive sessions 
    • Upcoming testimony of Fed Chairman Jerome Powell may provide insights into future rate cuts. 

    This article is a follow up to: US dollar slips as inflation data points to rate cuts 

    The US dollar has been on a consistent downward trend, marking its seventh consecutive session of losses. This decline comes as the markets process recent economic data, which has led to a dip in confidence in the greenback.

    The US dollar index (Symbol: USDX) has fallen from 106.10 to 104.80 since the trend began. 

    The image displays a candlestick chart of the US Dollar Index (Symbol: USDX) on a four-hour timeframe, depicting the price movement over a specific period. The trend indicates a slight increase of 0.05%, with an open price of 104.65, a close price of 104.705, a high of 104.713, and a low of 104.603. The chart features multiple indicators: Moving Averages (MA) with various periods (5, 10, 20, 30), showing the average price over these timeframes. The volume is represented by vertical bars at the bottom, illustrating the number of trades executed. The MACD (Moving Average Convergence Divergence) is positioned at the bottom, aiding in identifying changes in the strength, direction, momentum, and duration of a trend in the stock's price.

    The image above shows the beginning of a downward trend in the US dollar index, observed on the VT Markets app. 

    Markets responded positively to a cooler-than-expected jobs report. Employers added 206,000 new workers in June, surpassing the consensus of 189,000 in Wall Street, but falling short of the revised figure of 218,000 in May.

    This moderation in job growth suggests that the US workforce expansion may be tapering off, potentially influencing the Federal Reserve to consider easing interest rates to promote more accessible borrowing conditions. 

    Market focuses on Fed Chairman Jerome Powell 

    The coming week will be vital as Fed Chairman Jerome Powell addresses lawmakers in a two-day testimony. Statements by Powell are anticipated to provide clarity on the perspective on interest rates, the economic outlook, and possible future actions by the central bank.

    This backdrop has seen the US dollar weaken further, with the euro (Symbol: EURUSD) rising to $1.0830, the Japanese yen (Symbol: USDJPY) approaching ¥160.50, and the British pound (Symbol: GBPUSD) reaching a one-month high of $1.2815. 

    Implications and forecast 

    While the addition of 206,000 jobs in June shows resilience in the labor market, the decline from figures in May and the rising unemployment rate to 4.1% point towards a slowing economy. Such mixed signals have led the Fed to adopt a cautious approach.  

    Related article: Interest rate tug-of-war for central banks 

    Traders should monitor commentary from the Fed closely and testimony from Jerome Powell could significantly impact the direction of the US dollar, especially if he hints at potential rate cuts or continued caution. Moreover, the upcoming economic data releases, including the personal consumption expenditures index, will further influence market sentiment. 

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