The greenback rose against a basket of currencies after the release of strong U.S. non-farm payrolls data, which firmed the view that the U.S. economy would come out of the global crises first. In addition, hawkish comments from Atlanta Federal Reserve President Dennis Lockhart supported the dollar to rise. The ICE dollar index jumped 1.2% which is the largest one-day gain in more than five months.
During Asian and European sessions, euro traded sideways against the dollar as traders were side-lined ahead of the U.S. job data. The single currency jumped initially to intra-day high of 1.4269 after U.S. unemployment rate in May came out at 9.4%, which was much higher than the reading of 8.9% in April. However, euro then tumbled on dollar's broad-based strength as traders reacted on the much better-than-expected non-farm payrolls data (decrease of 345,000 versus forecast of 517,000). Furthermore, Atlanta Federal Reserve President Dennis Lockhart said that the Fed needs to be “anticipatory” and not wait too long to tighten monetary policy and the Fed could raise interest rates while maintaining the quantitative easing policy.
The British pound also traded narrowly against the dollar before New York session trade. The sterling then rebounded briefly and sharply to as high as 1.6245 against the dollar after the unemployment rate which is the highest in nearly 26 years. However, investors focused on the much smaller-than-expected U.S. job cuts as a slower deterioration of the labor market supported bets dollar-denominated assets will gain while the U.S. economy is recovering. Cable fell to intra-day low of 1.5940 against the greenback in New York afternoon session. In addition, although the British Prime Minister Gordon Brown rearranged his cabinet amid calls for his resignation, this political uncertainty pressured the pound against the greenback.
Janet Yellen, President of the San Francisco Fed, said the recent sharp rise in U.S. Treasury yields wud be 'disconcerting' if it is driven by worries that the Federal Reserve will not be able to prevent a jump in inflation. Yellen warned that more volatility could lie ahead of U.S. and global economies now that a long period of relative stability, often termed the 'Great Moderation', seemed to have passed.
Monday will be Australia holiday. Date to be released next week include Japan current account, economic watch, Switzerland unemployment rate, German factory orders, Canada housing starts on Monday, Japan leading indicators, German current account, trade balance, U.K. BRC retail sales, RICS and DCLG house price, German industrial production, U.S. wholesale inventories on Tuesday, Japan CGPI, Australia Westpac consumer confidence, German CPI and HICP, U.K trade balance, industrial and manufactory production, U.S trade balance, Fed budget on Wednesday, New Zealand RBNZ rate decision, Japan GDP, Australia unemployment, German WPI, Canada capacity utilisation, U.S jobless claims, retail sales data on Thursday, Japan capacity utilization, industrial production, consumer confidence, eurozone industrial production, U.S import and export price, and University of Michigan survey on Friday.