The U.S Dollar Index (DXY) surged 0.40% today as a stronger-than-expected jobs report added strength to the dollar.
The Numbers
U.S. nonfarm payrolls ticked up by around 303,000 in March compared to a gain of 270,000 in February. The Street largely expected a gain of 212,000 for March. Concurrently, the unemployment rate cooled down to 3.8% from the prior 3.9%.
Weakening Case for Near-Term Rate Cuts
The strong payroll numbers come just as some Fed officials hinted at the need for further progress on inflation before rate cuts can be considered. Inflation has largely remained sideways in recent times instead of steadily ticking lower. As a result, Minneapolis Fed’s Neel Kashkari feels the timing of rate cuts could get extended.
Moreover, today’s job numbers provide the Fed more legroom to maintain its cautious stance on rate cuts. The numbers also mean that traders will likely scale back expectations of a rate cut to September from June.
Action in Japan and Europe
In Japan, BOJ’s Kazuo Ueda expects inflation to gather pace on the back of higher wages. This could mean a possible rate hike and a stronger Yen over the coming periods. Additionally, Japanese authorities are likely to step in to shore up the Yen if the excessive weakness in the currency persists.
In Europe, the ECB is largely expected to begin slashing rates from June.
The DXY continues to hover over its 45-day and 200-day moving averages. The next major resistance for the index is placed at the 105.03 mark.
Source: TradingView
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