US Dollar Under Pressure On Weak Economic Data

US Dollar Under Pressure On Weak Economic Data - US dollar banknotes
Bill Cascade   NEW 09/10/2019 00:00:00 Forex

The US dollar is struggling for direction, having lost momentum on weak employment data. The greenback has registered impressive gains, in recent months, as other majors currencies continued to edge lower. However, as it stands, the turmoil in the financial markets appears to be finally catching up with the currency.

DXY dollar index chart and rate cuts

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US Dollar Weakness 

The greenback was on the receiving end last week, as U.S. jobs underperformed expectations. In addition to weak employment data, trade tension between the U.S. and China has also continued to weigh in on the dollar strength as investors continue to factor in the political risk at stake.

After hitting a session high against the Japanese Yen in Friday trading session, the dollar came down tumbling as data showed Non-Farm Payrolls increased by 136,000 below 168,000 jobs created in August. The dollar plunged as economists expected the economy to register 145,000 jobs increments for September.

However, the dollar did steady afterward as traders factored in the fact that the unemployment rate is on a downward trajectory, having plunged to 3.5% a 50-year low. Considering developments in other economies around the world, this is a major milestone as it continues to show the resilience of the U.S. economy amidst growing concerns of a looming global recession.

A decline in the unemployment rate helped shrug off concerns of a slowdown in the manufacturing sector that had initially raised concerns about the U.S. economy. People were initially bracing for a weaker employment data report on manufacturing index plummeting to three-year lows of 52.6. A plunge of non-manufacturing data to ten-year lows is another concern that continues to plague the US dollar strength in the market.

Forex Outlook

Going forward, the US dollar will be the center of attention amidst geopolitical tensions across the divide. A push by the Democrats to impeach Donald Trump is the latest political uncertainty that could continue to weigh in on the dollar.

The emergence of a second whistleblower showing that U.S. officials pressured Ukraine officials to launch a probe on Joe Biden and his son will be the center of attention. 

Reports that the U.S. is struggling to reach an agreement with North Korea on a path to denuclearization is another headwind expected to continue rocking the financial markets. A standoff between the two countries could trigger demand for safe havens such as the Yen and the Swiss Francs.

The Japanese Yen is already edging higher against a basket of other major currencies in early Monday trading session. The Yen is already up by 0.1% against the dollar to 106.79.

The Chinese Yuan, on the other hand, remains under immense pressure, as it is the most exposed currency amidst the trade war standoff with the U.S. The Yuan is already down by 0.3% against the dollar.

Weakness in the dollar has fueled strength in the Euro, which is trying to bounce back after recent upheavals. The Euro was up by 0.03% to 1.0979.

The British pound, on the other hand, remains unchanged at 1.2325 as Brexit standoff drags on.

 

 

 

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