The US dollar exchange rate complex is under sustained selling pressure right across the board following the release of worse-than-expected employment data out of the United States.
Mayday! Mayday! is precisely what the markets will be screaming after this frankly shocking non-farm payrolls number. - Marcus Bullus @ MB Capital.
The GBP/USD has rallied by a percent to 1.4565 while the EUR/USD has rallied by 1.4% to 1.1307.
The US Bureau of Labor Statistics reported today that “nonfarm payroll employment changed little (+38,000).”
An sanguine statement if ever there were one - this was a massive miss on the 164K markets were forecasting.
To make matters worse the previous month’s already poor reading was revised lower to 123K.
The headline numbers completely overshadowed all the other smaller prints, Average Hourly Earnings for example were a non-event at 0.2%.
For the dollar the big issue is what the data means for the US Federal Reserve and their intentions on raising interest rates.
The US currency has been in the ascendency through May as markets increased bets that the US economy was on a stable enough footing to justify an interest rate rise.
These bets will now be pared back.
“After a well below par result in April, Fed Chair Janet Yellen will be dismayed to see nonfarm payroll data sink further today. The significantly lower than expected figures couldn’t have come at a worse time, as the June FOMC meeting will take place without another major data release amid swirling rumours of another rate hike planned,” says Dennis de Jong, Managing Director at UFX.com.
Analyst Tom Floyd, Senior Sales Trader at Foenix Partners agrees:
“Coupled with subdued wage growth the data throws a large spanner in all the works of Janet Yellen and other Fed members in attempting to adjust market expectations to a faster rate hiking cycle.”
David Lamb, head of dealing at FEXCO Corporate Payments, comments:
"The Dollar bombed instantly on the back of this diabolical May non-farm payrolls report, the weakest since 2010.
"You certainly can't write it off but there's no doubt the greenback will have a question mark hovering over it for a while following this print.
"Even though the jobless rate came down, this was negated by a similar fall in the participation rate.
"The Verizon strike may have played a role in this number, but it was certainly not the major driving factor.
"There's something more fundamental going on in the US economy but right now it's hard to know what.
"We can safely say that a June hike is now off the cards, all the more so given the growing uncertainty surrounding the impact of a possible Brexit. The odds on a July hike have also just lengthened.
"After all the talk of an imminent rate rise to come, the Fed could be left slightly red-faced after this shocker of a number.
"Unless we have a major turnaround next month, the US could have a new President before we see rates go up.”
Marcus Bullus, trading director, MB Capital, comments:
"Mayday! Mayday! is precisely what the markets will be screaming after this frankly shocking non-farm payrolls number.
"It's the weakest number for six years and there's little doubt that it has hit the market for six.
"Coupled with ongoing Fed concerns around Brexit-led geopolitical risk, any prospect of a June hike has just been kicked firmly into the long grass.
"The timing of a US rate rise is no longer just about the potential impact of the EU referendum and global headwinds but the domestic economy.
"The May 2016 non-farm payrolls data will force policymakers to take a long, hard look in the mirror. It's only one data point in a sea of data points but it's got the potential to send policymakers back to the drawing board."