Recent U.S. data, including a significant increase in non-farm payrolls and an unexpected drop in unemployment, failed to maintain the Dollar's gains in the week up to April 5. The U.S. Dollar fell against the Euro, the British Pound, and the Australian Dollar, though it did rise against the Japanese yen.
Despite reaching almost a 5-month high, the Dollar Index (DXY), which measures the Dollar's strength against six major currencies, fell by 0.19% during the first week of April. The DXY fell from its closing figure of 104.49 at the end of March, to finish at 104.29 on the first Friday of April. Throughout the week, the index fluctuated between a high of 105.10 and a low of 103.92.
In this period, Federal Chair Jerome Powell reiterated that the Federal Reserve needs more confidence in sustainable inflation before it will consider its 2% target. A surprising rebound in the ISM Manufacturing PMI and a greater than anticipated increase in job openings both contributed to the U.S. Dollar's rise. However, a drop in the ISM Services PMI to 51.4 in March, down from 52.6 in February and below the forecasted 52.7, sparked speculation of rate cuts.
Even the stronger-than-anticipated jobs data, which was released on Friday and showed an addition of 303,000 to non-farm payrolls for March (way above the market expectation of 200,000 and the previous figure of 270,000), did not boost the Dollar in daily trading. The unanticipated decline in the unemployment rate from the two-year high of 3.9% to 3.8% also added to the belief that there is little room for the Fed to reduce rates further.
The Euro, however, rose 0.39% against the Dollar in the same week, with the EUR/USD pair rising to 1.0835 from 1.0793. Meanwhile, the pound sterling climbed against the dollar despite hints of rate cuts from the Bank of England and diminishing expectations of rate cuts from the Federal Reserve. The AUD/USD pair also increased between March 29 and April 5 from 0.6521 to 0.6578. Records from the Reserve Bank of Australia released during the same week dismissed the necessity of raising interest rates.
In contrast, the yen dropped against the U.S. Dollar in this period. The USD/JPY pair rose from 151.31 to 151.61.
As the possibility of a Fed rate cut remains a significant concern for global currency markets amid signs of a strong U.S. labor market, attention has now shifted to consumer price and producer price inflation updates from the U.S., as well as the expected release of the FOMC minutes.
Updates on UK GDP and the interest rate decision by the ECB due this week are also influencing market sentiment. Currently, the Dollar Index has declined to 104.22, the EUR/USD pair is at 1.0845, the GBP/USD pair is nearly flat at 1.2636, the AUD/USD pair has risen to 0.66, and the USD/JPY pair has increased to 151.81 due to the yen's weakness.
