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With A Million New Jobs Looming, Why Can’t U.S. Dollar Rally?

By Kathy LienForexMay 03, 2021 06:40PM ET
www.investing.com/analysis/with-a-million-new-jobs-looming-why-cant-us-dollar-rally-200577216
With A Million New Jobs Looming, Why Can’t U.S. Dollar Rally?
By Kathy Lien   |  May 03, 2021 06:40PM ET
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The U.S. dollar kicked off the first trading day of May with broad-based losses. On Friday, U.S. non-farm payrolls are due for release, and with the labor department expected to report a million new jobs, some investors are wondering why the U.S. dollar is unable to rally. With one of the world’s best vaccination rates, stimulus checks and a rollback on restrictions, the U.S. is not only recovering rapidly but emerging as the world’s leading engine of growth.
 
The biggest problem for the U.S. dollar is that on its most fundamental level, the greenback is a safe-haven currency. The U.S. led the recovery since the beginning of the year, so investors had plenty of time to buy dollars and take profits. Now, vaccination rates are rising in Europe and they are looking to ease restrictions. The first quarter was the U.S. recovery trade, but the second to third quarters should be focused on the global recovery. Strong global growth is generally more positive for high-beta currencies than safe-haven currencies like the U.S. dollar. When Eurozone nations finally rollback restrictions and show stronger data, there will be renewed interest and demand for the euro. The recent weakness in the dollar is a reflection of investors getting ahead of this trading opportunity.
 
Add to that the Federal Reserve’s insistence that substantial progress has not been reached and an unexpected decline in the manufacturing ISM index, and we can see why the U.S. dollar refused to rally despite the prospect of a very strong jobs report on Friday. Economists were looking for the ISM manufacturing index to rise to 65 from 64.7 but it dropped to 60.7 in April. According to the details of the report, it is high prices and supply shortages that set back activity instead of demand, but yields declined. The ISM services and non-farm payrolls report are still expected to show a red-hot recovery. The U.S. dollar should respond positively to these reports, but as the global recovery becomes the bigger story, demand for U.S. dollars will wane.
 
Aside from the U.S. jobs report, the Reserve Bank of Australia and Bank of England monetary policy announcements are also in focus this week. The RBA meets tonight and it is widely expected to keep monetary policy unchanged. The RBA should share the RBNZ’s concerns about house prices but, with overall inflationary pressures subdued, it is in no rush to act. Even with the extraordinary amount of stimulus the RBA is providing, core price growth hit its lowest level ever in the first quarter. A lot of this is driven by slow wage growth, which is a challenge to recover, so it may be some time before price pressures see meaningful acceleration.
 
Sterling was the best performing currency on Monday as investors prepare for optimism from the Bank of England. While no changes are expected from the BoE, the strong recovery will prompt the central bank to revisit its outlook. Its economic assessment will be more upbeat as the government prepares to end its one-metre social distancing rule on June 21. This would pave the way for the reopening of live concerts, sporting matches and theaters just in time for summer. 
 
The Australian and New Zealand dollars also traded higher, but the Canadian dollar lagged behind. Unlike the U.S., economists are looking for job losses in Canada in the month of April. A large part of the country is still in lockdown, but the primary reason for the potential data disappointment is the unexpectedly strong job reports over the past few months.  
With A Million New Jobs Looming, Why Can’t U.S. Dollar Rally?
 

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With A Million New Jobs Looming, Why Can’t U.S. Dollar Rally?

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Comments (20)
nica torres
nica torres May 06, 2021 9:10AM ET
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hello how to invest for example thanku
Muhammad Shabbir
Muhammad Shabbir May 05, 2021 9:03AM ET
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Hello
FATME sahraie
FATME sahraie May 05, 2021 12:20AM ET
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hi,dear I'm iranian how to do get the money
Abdoo Biskar
Abdoo Biskar May 04, 2021 7:05AM ET
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👏🏻👏🏻👏🏻👏🏻💯✍️✍️👍🏻✌🏻🤗🤗🤝💓💕🙏🤙
Jp Vee
Jp Vee May 04, 2021 5:53AM ET
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With all the Money stimulus give away in Trillions - you really have to ask about why the Dollar won't rally?? ---LMAO!!!🤣
jonah gaff
jonah gaff May 04, 2021 2:40AM ET
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absolute lies.
William Bailey
William Bailey May 03, 2021 11:49PM ET
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Did we mention 2 million are applying for unemployment every month?
abir ahamed suvo
abir ahamed suvo May 03, 2021 10:44PM ET
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hello
Josh Hood
Josh Hood May 03, 2021 10:17PM ET
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Food industry jobs that don't pay that's why.
William Bailey
William Bailey May 03, 2021 10:17PM ET
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Yep . Its all a pack of lies and fibs... like denial of inflation , bur Buffet put that myth to rest today. Massive inflation from Fed greed for the wealthiest
Klaus Weyers
Klaus Weyers May 03, 2021 10:14PM ET
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with sleepy joe in charge and his money printing and taxing the greenback will go much lower
Casino Crypt
CasinoCrypt May 03, 2021 9:01PM ET
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with fed swamping the banks with crisp new money why isn't the dollar below the 88 level ?
jonah gaff
jonah gaff May 03, 2021 9:01PM ET
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regulations created by lockdown restricte how the fiat flows. economy fully opens and we have hyperinflation.
Phil Smith
Phil Smith May 03, 2021 8:20PM ET
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Lmao
Luqman Firdaus
Luqman Firdaus May 03, 2021 8:10PM ET
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I love
David Allen II
David Allen II May 03, 2021 7:55PM ET
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bond yields? fed dovishness? who wants to hold usd when the reason for holding usd is safety in the long term?
Jim Herndon
Jim Herndon May 03, 2021 7:38PM ET
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Kathy, think about it, then get back to class before the bell rings.
Itachi Uchiha
Itachi Uchiha May 03, 2021 7:38PM ET
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You can't make an article while Kathy can make an article with explanation. you sit and be quiet.
Francesco Lucchesi
Francesco Lucchesi May 03, 2021 7:31PM ET
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world's engine of growth lol. now that's funny 🤣
Jerome NY
Jeff_Musk May 03, 2021 7:17PM ET
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Nope its because Fed printed too many dollors if it were not hard currency it would have been worse
David Allen II
David Allen II May 03, 2021 7:17PM ET
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why are physical gold and other precious metals holding up? if the us still was using silver certificates we would for sure make out better.
Javier Escamilla
Javier Escamilla May 03, 2021 7:01PM ET
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Its all about keep adding and time will do the rest :)
sowrav shil
sowrav shil May 03, 2021 7:01PM ET
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sorry I first time this software share bazar
Larson Leyson
Larson Leyson May 03, 2021 6:56PM ET
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“While you were here giving your opinion Biden just spent another Trillion ! ”
David Allen II
David Allen II May 03, 2021 6:56PM ET
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ccc
William Bailey
William Bailey May 03, 2021 6:42PM ET
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7-10 bucks an hour jobs is why !!! What a joke
Michael Leffler
Michael Leffler May 03, 2021 6:42PM ET
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We have 2 manufacturing facilities locally offering all shifts, sign-on bonus, immediate insurance, plus all the 'goodies' starting at over $22 bucks an hour.  Crickets.
Bill Bill
Bill Bill May 03, 2021 6:42PM ET
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Haha
Matt Rezner
Matt Rezner May 03, 2021 6:42PM ET
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Where lmao? I would be all over that.
Sandro Pop
Sandro Pop May 03, 2021 6:42PM ET
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5.27 USD per hour over here but not in the US
 
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