US dollar slumps as jobs data disappoints

The US dollar fell sharply yesterday afternoon, relinquishing earlier gains, after new data showed a steep decline in job openings, indicating a cooling labour market.

So far today, the pound is finding some success, with GBP/EUR rising to €1.1636 and GBP/USD fluctuating up to $1.2644. GBP/CAD is wavering higher around CA$1.7150, while GBP/AUD and GBP/NZD have climbed to AU$1.9556 and $2.1260, respectively.

Coming up, we have the latest US ADP employment change figures. Could more signs of slack in the labour market see USD suffer further losses?

What’s been happening?

The US dollar initially rose yesterday as a recovery in US Treasury yields lifted the ‘greenback’.

However, USD exchange rates then dropped after the latest JOLTs job openings survey missed forecasts. In July, US job vacancies fell to their lowest level since March 2021, suggesting that the Federal Reserve’s aggressive policy tightening is beginning to hit employment.

This saw markets trim Fed interest rate rise bets, causing the US dollar to slide.

Meanwhile, the euro faced pressure at the start of the session after German consumer confidence unexpectedly declined to a four-month low.

EUR was able to recover later on thanks to its strong negative correlation with USD.

As for the pound, the UK currency failed to find a clear direction amid a lack of British economic data. Recent worries about the UK economy kept GBP on the back foot.

What’s coming up?

Turning to today, the single currency could face headwinds following an expected decline in Eurozone economic sentiment.

Later this afternoon, Germany’s latest consumer price index may add to the pressure on EUR, if cooling inflation is seen as denting European Central Bank (ECB) rate hike bets.

The US dollar also faces potentially impactful data today. The ADP employment change figure is forecast to show a slowdown in job creation, potentially weakening Fed bets and denting USD.

The second estimate for US GDP growth in the second quarter of this year is also out. Any deviations from the preliminary results could cause volatility.

As for the pound, the ongoing lack of UK data could see Sterling continue to trade without a clear direction.