Dollar Up; Recovering After Payrolls Hit

The dollar drifted higher in early European forex trading on Monday, recovering some of its losses. The movement came after Friday’s disappointing jobs report raised questions concerning the strength of the U.S. economic recovery.

The Dollar Index was up 0.1% at 91.075, at 3:55 AM ET (0755 GMT). This followed a 0.6% dip on Friday.

USD/JPY inched up 0.1% at 105.50. GBP/USD was flat at 1.3735, near a three-year high.  Moreover, the risk-sensitive AUD/USD fell 0.1% to 0.7676.

Less jobs were created in the economy than expected with only 49,000 non-farm payrolls recorded. This was shown in Friday’s U.S. jobs report for January.

The U.S. jobs data’s disappointing results may mark the end of the first phase of the dollar’s recovery.  This was according to Marc Chandler, Chief Market Strategist at Bannockburn Global Forex.

However, they suspect that the employment data is not a game-changer, he added. Chandler also said that the U.S. economy is expanding. 

Moreover, he said Japan, and especially Europe, are contracting. One way or the other, the U.S. will be delivering significantly more fiscal stimulus, he said.

The prospect of a hefty fiscal stimulus from U.S. President Joe Biden’s administration rose on Friday. This was after the House of Representatives adopted the budget resolution that cleared the Senate. It was paving the way to pass a stimulus bill with only Democratic votes.

Treasury Secretary Janet Yellen said the U.S. can return to full employment in 2022. That is if it enacts a robust enough stimulus package, she said.

Currencies Movements

The EUR/USD pair traded largely unchanged at 1.2050, after climbing 0.7% on Friday. This followed the weak nonfarm payrolls release. 

Industrial output in Germany stagnated in December, coming in flat on the month. That’s after an upwardly revised increase of 1.5% in the previous month as lockdowns held back Europe’s largest economy. After seven consecutive months of expansions, this was the first stagnation.

The relative speed of the vaccine rollouts in the two regions is another factor potentially helping the dollar. This helps it in going forward against the euro. 

Some estimates see the U.S. reaching herd immunity with its vaccine plans by early August. This was according to ING analysts in a research note. The EU may not reach that milestone until late October, the analysts added.

Furthermore, the GBP/EUR pair held on to most of last week’s gains. This was despite weekend reports suggesting that the end of the Brexit transition phase had crippled exports to the EU.

Exports were down 68% from a year earlier, according to estimates.