US Dollar Falls Despite Stronger Non Farm Payrolls and Rising Treasury Yields

The US dollar failed to move higher through late New York trade, as a stronger-than-expected Non Farm Payrolls report led to a fresh wave of selling across USD-denominated currency pairs. It was apparently the case of “buy the rumor, sell the news”, with currency traders betting that yesterday?s ADP and ISM Services data would produce a positive result in this month?s Bureau of Labor Statistics results. The US dollar initially saw a bid on the strong NFP report, but an immediate reversal doomed it lower for the rest of New York trade.

Officials reported that the US economy added 132,000 jobs in the month of June?7,000 above consensus forecasts at 125,000. Perhaps of greater interest, May?s job creation was revised higher by 33k to 190k and left the Unemployment Rate stable at 4.5 percent. Though markets have grown accustomed to large revisions of previous months? results, the net implications of the release were clearly bullish for the US economy. Average Hourly Earnings were likewise above consensus at 3.9 percent, leaving risks of inflationary wage pressures to feed into later consumer price numbers. The dollar should have continued higher on the data, but markets nonetheless added to short positions on its inability to clear significant technical levels against major counterparts. This subsequently leaves an increasingly bearish tone on the downtrodden greenback, but a simultaneous rally in bond yields may nonetheless leave the Greenback supported through end-of-day price action.
Domestic equities likewise edged lower in the moments following the report, as traders showed concerned that higher bond yields and a hawkish fed would increase borrowing costs through the medium term. Though signs of stronger-than-expected economic growth is positive for earnings, stocks are often much more sensitive to signs of higher lending rates. A later bounce has nonetheless left the three major indices higher through the afternoon, with the Dow Jones Industrial Average up 26 basis points to 13,600.79. The S&P 500 traded 3 points improved to 1,528, while the NASDAQ added 6 points to 2,663 at time of writing.
Fixed Income markets continued to feel the pinch of stronger than forecast economic data, with the benchmark 10-year Treasury Note down 11/32 points to 94 and 2/3. Yields are up 5 basis points to 5.19 percent?their highest levels in two weeks. Recent trading has been incredibly volatile for US bonds, with benchmark indices trading at their widest ranges in recent memory. The previous tumble in yields initially led the dollar lower against foreign competitors, but their subsequent retracement should leave the Greenback bid through short term trade.