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Payrolls Continue to Undermine Dollar

Posted by Joseph Trevisani on Jun 8, 2016 5:58:55 PM

The dollar fell for a fourth day as markets discounted the possibility for a Fed rate hike next week after Friday's disappointing payrolls report.

The U.S. currency sank against all of its major counterparties, reaching a one month low against the euro at 1.1410. The dollar saw a one month low of 106.38 against the yen on Monday and closed marginally stronger at 106.99 today. 

Traders have become convinced that slowing American job growth will keep the central bank from its second 0.25 percent increase when the FOMC meets next Tuesday despite strong indications from several Fed governors in the days and weeks before that the bank was seriously considering another move. These comment had pushed to dollar to a three month high against the euro of 1.1097 on May 30th. 

Fed Chair Janet Yellen added to the certainty when she failed to signal any other timing for the next increase in her speech titled “Current Conditions and the Outlook for the U.S. Economy" in Philadelphia on Monday.

The chance of a Wednesday rate increase dropped to 3 percent as compiled by Bloomberg from the fed funds futures market. That is down from 22 percent last week.

The odds for an increase at the July 27th meeting are just 21 percent, having been close to 40 percent before non-farm payrolls.  The possibility does not rise above 50 percent until the December 14th meeting. 

The dollar posted its largest losses against emerging markets currency curries, specifically the South African rand, the Mexican peso and the Brazilian real.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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