Dollar range-bound, struggling for clear direction after jobs report

Trades in the U.S. dollar were rather range-bound on Friday following the July jobs report, but struggled to eke out a clear direction.

The ICE U.S. Dollar Index DXY, -0.13% , which measures the greenback against six rivals, traded in a tight band around the unchanged level from Thursday, dipping both ahead of and after the morning’s economic data before edging back into positive territory. The gauge was last down less than 0.1% at 95.128, on track for a 0.5% gain for the week.

The broader WSJ Dollar IndexBUXX, -0.22% was down 0.2% at 88.68.

Nonfarm payroll numbers came in below consensus estimates at 157,000, compared with 195,000 expected by economists polled by MarketWatch. The unemployment rate ticked down to 3.9% from 4%, in line with expectations, and yearly hourly wages were unchanged.

“There were plenty of positive numbers in today’s U.S. jobs report but few to quicken the pulse — and even fewer to move the market,” said Jacob Deppe, head of trading at the online trading platform Infinox.

While 157,000 new jobs created was still far from failure, the jobs report pointed at something else, Deppe said: “lurking beneath the vanilla surface of today’s jobs report is a more bitter reality — the American job creation miracle is slowly running out of road. With the number of people re-entering the labor market falling and the U.S. lurching ever close to full employment, the increasing shortage of staff threatens to slam the brakes on an otherwise booming economy."

The July ISM non-manufacturing index also missed consensus forecasts, coming in at 55.7.

Otherwise, trade tensions were at the center of attention. On Friday China said they would retaliate with tariffs on $60 billion on U.S. goods.

Earlier in the week, it was reported that the U.S. could raise tariffs on some $200 billion in Chinese goods to up to 25% from 10% previously announced.

“The reasons for this looking at increasing the tariff percentage may well be down to the recent decline in the yuan which has likely cushioned some of the effects,” wrote Michael Hewson, chief market analyst at CMC Markets U.K. “Nonetheless it didn’t go down well with Chinese officials who responded by saying that they were ready to retaliate to any escalation.”

Meanwhile, the People’s Bank of China announced it will require a reserve ratio of 20% on currency forwards. “The decision is aimed at stabilizing recent volatility from trade frictions,” said Ashraf Laidi, strategist at Intermarket Strategies.

During the Asian trading day, China’s offshore traded yuan USDCNH, -0.5928% which moved a bit more freely compared to trading in Beijing, weakened against the dollar to a level not seen since December 2016. One buck bought 6.9129 yuan at Friday’s peak, since then retreating to 6.8500, down 0.5% on the day. China’s onshore traded currency USDCNY, +0.0424% was more level, with one dollar buying 6.8457, little changed from Thursday, according to FactSet.

Elsewhere, the Turkish lira USDTRY, +0.1243% was only slightly weaker versus the dollar after July consumer-price inflation came in below the consensus. Turkey has been struggling with double-digit inflation, as well as a president criticism of his central bank’s response to it. In July, consumer prices rose 15.8%, up from 15.4% prior, but below the FactSet consensus estimate of 17.1%.

The dollar had breached the benchmark of 5 lira for the first time on record on Wednesday. It last bought 5.0823 lira, up 0.2%, according to FactSet. For the week, the lira is down 4.7% versus the greenback.

Providing critical information for the U.S. trading day. Subscribe to MarketWatch's free Need to Know newsletter. Sign up here.

Source: Read Full Article