US Dollar Plummets as Jobs Report Smashes Expectations
The latest US non-farm payrolls report has shocked economists and investors alike, revealing a significantly worse-than-expected contraction in jobs. According to the data, the economy shed 23K jobs in July, far below the +80K expected by analysts. This is not only a disappointment but also a downward revision of the prior two reports, which now shows a combined loss of 103K jobs over the three-month average.
The market had been leaning towards a rate hike in September, with expectations priced in at 57% just before the data release. However, this has now fallen to 44%, sending shockwaves through the US dollar. The currency tumbled across the board, with USD/JPY plummeting 127 pips to 157.14.
The Canadian dollar also benefited from the decline in the US dollar, as Canada's employment report showed a surprise increase of 75.1K jobs compared to the expected 15.0K. This sent the CAD/USD pair down 65 pips to 1.3948, its lowest level since June 15.
The drop in the dollar and the recalibration of Fed rate expectations has been a boon for gold, which has rallied $122 to $4360 today. The weekly chart is now showing a big bounce after months of selling, indicating a possible reversal in the trend.