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02.08.2024, 13:07

AUD/USD recovers above 0.6500 on renewed USD weakness

  • AUD/USD gathered bullish momentum and turned positive on the day above 0.6500.
  • Nonfarm Payrolls in the US rose by 114,000 in July.
  • US Dollar stays under strong selling pressure after disappointing jobs data.

AUD/USD gained traction during the American trading hours on Friday and climbed above 0.6500. At the time of press, the pair was up 0.4% on the day at 0.6530.

US jobs data weigh heavily on USD

The US Dollar (USD) came under heavy selling pressure and fuelled AUD/USD's rebound. The data published by the US Bureau of Labor Statistics (BLS) showed that Nonfarm Payrolls (NFP) rose 114,000 in July. This reading followed June's increase of 179,000 (revised from 206,000) and missed the market expectation of 175,000 by a wide margin. Moreover, the Unemployment Rate climbed to 4.3% from 4.1% in June.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   -0.93% -0.48% -1.09% -0.12% -0.36% -0.30% -0.93%
EUR 0.93%   0.45% -0.13% 0.80% 0.57% 0.62% -0.00%
GBP 0.48% -0.45%   -0.62% 0.37% 0.10% 0.18% -0.43%
JPY 1.09% 0.13% 0.62%   0.99% 0.73% 0.78% 0.17%
CAD 0.12% -0.80% -0.37% -0.99%   -0.24% -0.16% -0.79%
AUD 0.36% -0.57% -0.10% -0.73% 0.24%   0.08% -0.56%
NZD 0.30% -0.62% -0.18% -0.78% 0.16% -0.08%   -0.60%
CHF 0.93% 0.00% 0.43% -0.17% 0.79% 0.56% 0.60%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The benchmark 10-year US Treasury bond yield is down more than 3% on the day below 3.9%, putting additional weight on the USD's shoulders.

Meanwhile, disappointing labor market data seem to be hurting the risk sentiment. As we head to Wall Street's opening bell, US stock index futures are down between 1.1% and 2.15%. Since the economic calendar will not offer any other high-impact data releases ahead of the weekend, the risk-averse market atmosphere could help the USD limit its losses.

Nonfarm Payrolls FAQs

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

 

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