US Open Note – Dollar pauses its rally after NFP; oil still up

Melina Deltas, XM Investment Research Desk

Dollar steady after NFP report

The US dollar lost some ground after the publication of the non-farm payrolls report but is still steady today around 105.50 against the yen, as there’s a good argument that the numbers make a big stimulus package more likely. The US dollar index is moving lower, while US stocks are recording new highs. The US economy added 49K jobs in January, compared to market expectations of a 50K rise and -227K previously, while the unemployment rate declined to 6.3% from 6.7% in the preceding month.

US President Joe Biden will hold a meeting with House leaders today as a series of non-binding amendments was proposed in the Senate as part of the process for Democrats to pass the relief package of the pandemic of $1.9 trillion without Republican agreement. Some Democrats are asking for a split of the vaccination funding from the broader relief plan. Also, Republicans expressed their disappointment that their offer of $618 billion was ignored. Biden seemed in favor of a bipartisan solution, but Democrats are ready to show that stimulus efforts will not slow down.

Loonie edges up after Canadian jobs report

Dollar/loonie is heading down despite the fact that the unemployment rate in Canada rose to 9.4% in January from 8.8% in the prior month. It was the highest unemployment rate since August.

The picture is brighter in the oil market, with WTI and Brent crude oil registering the biggest weekly gain since October and recording a new one-year high. Investors are expressing confidence that OPEC+ alliances are keeping global supplies in check for the rest of the year.

Euro and pound find some footing

A decline in the new Covid-19 infections in most parts of the world in the last few weeks is a good sign for a recovery. Germany, France and Italy are lagging the UK and US among G-7 nations in terms of vaccination rollouts. German Chancellor Angela Merkel mentioned that is too early to ease the pandemic restrictions, while the French Prime Minister said that a new lockdown is not in their present plans. The BoE forecast that the UK economy is heading for some recovery due to the strong push to vaccinate people.

The euro plummeted below the 1.2000 psychological level versus the US dollar, creating a fresh two-month low at 1.1978. However, the price found strong support at the 100-day simple moving average (SMA) and is heading marginally up. Pound/dollar is edging higher and euro/pound continues the selling interest below 0.8800.