Lower-than-expected US job data hammers dollars

The US dollar on Friday fell after data showed the country’s job growth remained lower than expectations for the month of June.

Following the job data, the greenback dipped but is still strong enough to likely lead the Federal Reserve to resume raising interest rates later this month as it has signalled, Reuters reported.  

According to the Labour Department, nonfarm payrolls increased by 209,000 jobs last month, less than the 225,000 that economists polled by Reuters had forecast. The unemployment rate fell to 3.6%, as expected, from 3.7% in May.

The dollar index fell 0.213% at 102.860.

Bonds whipsaw

Government bond markets whipsawed today as official US jobs data indicated the robust labour market was slackening off in what appeared to be a contradiction of other employment reports.

After strong partial figures on the US labour market sent selling in bond markets into overdrive on Thursday, official US nonfarm payrolls on Friday showed employers added 209,000 new hires in June, below forecasts and down from 339,000 in May.

This indicated the jobs markets was moving in a different direction to that outlined in ADP's private employment report on Thursday, which showed US payrolls jumped 497,000 last month, trouncing expectations for a 228,000 increase.

Two-year Treasury yields, which track interest rate expectations, dropped 7 basis points to 4.93% immediately after the non-farms report. Two-year yields had burst above 5% earlier in the session, on expectations that tight labour markets would influence the Federal Reserve to keep raising interest rates.

Ten-year Treasury yields, which had risen more than 17 bps in two sessions, eased 2 bps to 4.022%. Bond yields fall as prices rise.

Selling in European bond markets, which had been heavy this week to reflect moves in the US, also went into reverse.

Germany's two-year bond yield was down 6 bps at 3.298%, having hit a 15-year high on Thursday.

Too early 

In Britain, where traders are bracing both for recession and for interest rates heading towards 6.5%, two-year gilt yields eased back from post-2008 highs, losing 8 bps to 5.42%.

The US unemployment rate however fell to 3.6% from 3.7% in the prior month, leading some investors to caution it was still too early to bet on a slackening labour market prompting the Fed to cut its funds rate from the current level of 5% to 5.25%.

"It's amazing just how strong labour markets have been," said Neil Birrell, chief investment officer at London-based asset manager Premier Miton.

And while many investors started 2023 with bets that stock markets would fall and safe-haven bonds would shine as a recession took hold and central banks responded with rate cuts, this scenario remained uncertain, Birrell said.

"Can you have a recession without unemployment rising? The answer theoretically should be no."

In equity markets, MSCI's broad gauge of world stocks was flat ahead of US cash markets opening for trade. The index remained on course to end the week 1.4% lower.

S&P 500 futures were flat while Nasdaq futures were also steady.

The dollar index, which measures the US currency against major peers, eased 0.3%, set to end the week unchanged at around 102.77.

The euro was down 0.2% on the week at $1.0890. The yen fell 0.8% on Friday, hovering at 143.00 to the dollar.

In commodities, Brent crude futures were steady at $76.48 a barrel. Gold rose 0.6% to $1,922.49 an ounce.