US dollar and Treasury yields soar ahead of Nonfarm Payrolls (NFP) report

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Vrasidas Neofytou
Head of Investment Research

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US dollar and Treasury yields soar ahead of Nonfarm Payrolls (NFP) report

The world’s reserve currency and the US Treasury yields are bouncing back on Friday’s mid-day trading session ahead of the release of the most-expected monthly job data, the Non-Farm Payroll (NFP) report for July.

All eyes on Non-Farm Payroll (NFP) report:

The US Labour Department is due to release its July Nonfarm Payrolls report at 1:30 p.m. GMT, with economists estimating the US economy to have added 845k jobs in the previous month.

Investors are looking whether strong NFP data could make the case for faster Fed’s monetary policy tightening since the employment data is a very crucial economic indicator to the central bank’s policy decisions.

The prospect for the Fed to start raising its zero-interest rates amid elevating inflationary pressure, and to begin tapering its bond-buying program of $120 billion worth of bonds per month, is positive for US dollar since the central bank would start printing fewer greenbacks.

Forex traders turned bullish on US dollar after the hawkish comments by Fed’s Vice Chair Richard Clarida and other central bankers during the week, giving a boost to the US 10-year Treasury yields to climb above 1,25%.

Market reaction:

US dollar rises across the forex board, with the DXY-US dollar index against major peers soaring to near 92,50 level, hitting a one-week high.

EUR/USD pair, 1-hour chart

The strengthening greenback adds downward pressuring to the EUR/USD pair which retests the $1,18 key psychological support level, after it failed to breach the strong resistance level of $1,19 in previous days.

Other major forex pairs have moved in that direction, with growth-sensitive Pound Sterling falling back to $1,39 support level, while the safe-haven Japanese Yen losing some ground to ¥109,85.

Greenback is also getting stronger against commodities-sensitive currencies such as Canadian, Australian, and New Zealand dollars. The USD/CAD trades to near $1,25, well off the recent top of $1,28 despite the while antipodean currencies hoover lower to $0,735 and $0,705 respectively, following the falling crude oil and industrial metal prices amid the outbreak of the highly contagious “Delta” covid variant around the world.

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