USDOLLAR weakened following NFP, but holding ahead of inflation data



The US 2-year yield has had a strong correlation with FXCM's USDOLLAR basket since the beginning of July. The current correlation coefficient is a robust 71% (bottom indicator). On Friday, following the non-farm employment change data, the 2-year yield declined by 2.35% (green down arrow). The USDOLLAR followed and declined by 0.23% (blue down arrow).

The jobs data was mixed. The number of jobs added were 187K, lower than the 205K expected. Moreover, the previous month's number was revised downwards by 24k to 185K. Meanwhile, average hourly earnings came in at 0.4% m/m which was higher than the 0.3% m/m expected. The participation rate was steady at 62.6%.

A concerning aspect of the household employment survey is that the positive outcome was mainly due to an increase in part-time jobs. The survey indicates that part-time employment grew by almost 1 million last month, while full-time employment decreased by nearly 600,000. This situation means that even though wage growth seemed strong, replacing full-time positions with part-time suggests a weakness in the data.

Eyes switch now to the inflation data, with CPI out on Thursday and PPI on Friday. Currently the US 2-year yield is supported ahead of this, which is buoying the USDOLLAR.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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