MARKETS: USD pressures trading partners after NFP

By Jameel Ahmad, Chief Market Analyst at FXTM

The USD is currently pressuring its trading partners following the announcement that the United States added 223,000 jobs to its economy during April. The NFP is in line with expectations and although this might not be the spectacular number needed for the USD to get excited, this employment report still provides all the required assurances that the Federal Reserve remains on course to begin raising interest rates later this year. The necessary reassurances have been provided with this correlating in the USD being less vulnerable to further weakness. However, the surprising downside revision to just 80,000 for the March NFP will further eliminate any remaining optimism that the Fed might still pull the trigger on a possible rate hike for June.
September is the time to expect the first interest rate rise, and I would still expect the Federal Reserve to maintain a cautious stance and still show hesitance towards raising interest rates. This means that the USD rally we are currently encountering might not last for long, and it wouldn’t be a surprise if the USD began withdrawing its gains by the end of the current trading session. Although the USD is currently pressuring major currencies, the Fed will continue to adopt a slow approach to normalising monetary policy and this is the major reason why Gold is trading higher following the NFP.
The awareness that the Fed will maintain a slow approach to raising interest rates is also positive news for emerging market currencies, because these economies will be less vulnerable to the risk of a sudden outflow of capital.
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