US Dollar Exchange Rate Broadly Stronger: USD Gains on GBP, EUR & AUD

March 8, 2015 - Written by John Cameron

STORY LINK US Dollar Exchange Rate Broadly Stronger: USD Gains on GBP, EUR & AUD

The US Dollar (USD) exchange rate strengthened against the British Pound, Euro and Australian Dollar before the weekend as investors responded to better-than-forecast US data.

The safe-haven asset had risen earlier in the week thanks to a solid ISM Non-Manufacturing Composite print and maintained a position of strength on Thursday even as US initial jobless, continuing claims and factory orders figures fell short of estimates.

However, it was the strength of Friday’s US Non-Farm Payrolls report which pushed the US Dollar to multi-week and multi-month highs against several of its peers.

The Federal Reserve has frequently highlighted the correlation between a stronger domestic labour market and higher interest rates, so the nation’s NFP data is always closely attended to. Today’s batch of figures was expected to show that the US economy added 235,000 positions in February following a negatively revised increase of 239,000 at the beginning of the year. The US actually added 295,000 jobs however, helping to drive the unemployment rate from 5.7% to 5.5%. A dip in the participation rate also contributed to the fall in joblessness.

As soon as the report was released the US Dollar surged against its peers, gaining by 1.1% against the Pound, 1.4% against the Euro and over 0.5% against the Indian Rupee and Japanese Yen. The US Dollar to Australian Dollar exchange rate achieved a high of 1.2959. It wasn’t all good news however as US average hourly earnings were shown to have risen by 0.1% on the month in February rather than the 0.2% expected, pushing the annual figure down from 2.2% to 2.0%. US trade balance data also revealed that the nation’s deficit narrowed by less-than-expected.

The US Dollar’s uptrend could continue next week if US Advance Retail Sales show a rebound in consumer spending in February. The University of Michigan Confidence Index (due for release at the end of the week) will also be of interest. Further movement in the currency market could be occasioned by commodity price shifts and global economic developments. If the situation in Ukraine calms, it could limit demand for safe-haven assets like the US Dollar to a certain extent.

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