The US dollar index witnessed a sharp decline during trading on Friday, where it fell by about a full point, abandoning its strong profits that it managed to achieve following the release of shocking labor market data, which far exceeded market expectations, and exceeded the data of the past two months, and this sharp decline put the dollar on the way to incur its first weekly losses after a continuous series of profits that lasted eleven consecutive weeks.
On the trading front, the dollar index – which measures the performance of the US currency against a basket of 6 other major currencies – fell by 0.35%, registering 105.892 points, after it had risen strongly earlier in the session to touch the level of 106.971 points.
The September employment report came on Friday to provide a big surprise to the markets, as the data showed that the US economy added 336 thousand jobs during the month, almost double the forecast of almost 171 thousand jobs, surpassing the August and July readings of 227 thousand and 236 thousand jobs, respectively, despite the continuation of the strong monetary tightening cycle of the US Federal Reserve, which was expected to cause a weakening labor market.
These strong data, immediately after its release, led to strong gains for the dollar index, collective declines for major stock indices and losses for commodities and other currencies, as the strength of the dollar bulls put pressure on the profits of its competitors and significantly affected commodities and assets denominated in the US currency, as the markets translated this large reading of jobs that the labor market is strong and can withstand the continuation of Fed interest rates at high levels.
But taking a closer look at the details of the employment data report, we find that about 89% of the new jobs added by the private sector in the United States, that is, about 263 thousand jobs, were added to the services sector, and government jobs accounted for almost 22% of the total jobs added, And this is likely related to the end of the summer holidays and the new academic semester, which most likely reflects the temporary seasonal increase in service sector jobs only, especially in light of the unemployment rate remaining at its high level of 3.8%, and wage growth slowed.
This led to the dollar gradually losing its strong upward momentum and turning to losses, so the dollar index lost almost a whole point, despite the continued strong rise in Treasury bond yields, which rose to their highest levels in 16 years again, surpassing another record peak for this week, and attention is now turning to inflation and labor costs data due to be released next week.
