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    European Session – Dollar falls on weak US payrolls but recovers most losses

    The highlight on Friday was the US April jobs report. Currency markets were mostly quiet and risk sentiment was down until the release of this all-important data as there were no other major news today.

    The nonfarm payrolls report missed forecasts to show fewer jobs created in the US last month at 106,000 compared to the 215,000 created in March. It was the smallest gain since September. Most economists expected at least 200,000 jobs to be added in the economy. Today’s data follow from some other disappointing jobs data out this week. The private payrolls report from ADP also came in softer on Wednesday, while the weekly initial jobless claims on Thursday showed an increase from the previous week’s numbers.

    The unemployment rate remained at 5.0% but this was mainly due to a drop in the labour force participation rate. There was a bright spot in the average hourly earnings which came in at an annual rate of 2.5% compared to 2.3% in March. On a month-on-month basis earnings were in line with expectations to rise 0.3%.

    The softer jobs data this week will likely have an impact on the Federal Reserve’s interest rate outlook as there are signs that the US recovery is still on the mend. Rate hike expectations will most probably be pushed out further now by the markets.

    The US dollar fell after the data as investors’ first reaction was that the Fed will delay rate hikes for much later. But today’s report is not enough to say there is a deteriorating trend in the jobs picture. The greenback recovered most losses rather quickly after a brief tumble. Against the yen, there was a dip from above 107 yen to 106.42 yen after the data before a bounce back to 106.70 yen. US stock markets quickly erased losses and bounced back soon after falling, which helped the dollar as well.

    The dollar also made up most losses against other major counterparts. The euro spiked to $1.1478 before falling down to test the key 1.1400 level, while the pound rose to $1.4542 before tumbling back down.

    Aside from the US, Canada also released its employment report today. Data showed that 2,100 jobs were lost in April, while economists had forecast that the labour force would remain unchanged after a strong gain in March. However, the unemployment rate remained steady at 7.1%, while it was expectd to rise to 7.2%.

    The Canadian dollar became volatile during the release of the data. Against its US counterpart, the loonie remained near pre-data levels since the US jobs data were released at the same time. USDCAD traded to as high as $1.2950 after the data, a more than 2-week high, before steadying at $1.2920. The Canadian currency, which is sensitive to commodity prices, has been weaker lately as oil prices have fallen from recent highs.

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