Mini-Rally in the USD Generates Plenty of Buzz for Dollar Bulls
April jobs data from the nonfarm payrolls numbers were no reason to celebrate, especially when an actual figure of 160,000 new hires was reported, and 202,000 jobs were forecast. That the US recorded its weakest jobs growth numbers in 7 months is indeed a reason to be concerned, especially since analysts have been cautioning about the slowdown in the US economy. Based on the latest reports from the US Department of Labor, the actual jobs numbers were not supplemented by retailers.
According to the numbers, US retailers reduced their head count by 3,100 in April, after hiring 50,000 during January, February and March of 2016. In March 2016, the number of employed people in the retail sector was 15.918M, and the figure for April was 15.915M. In the US, unemployment held steady at 5%, and while private sector earnings grew by 0.3% overall, the year-on-year growth was a more respectable 2.5%.
Have Market Participants Been Too Hard on the USD?
Goldman Sachs market analysts are of the opinion that Fed rate hike expectations have dropped too much, too quickly. It is against this backdrop that the USD is bound to enter a period of resurgence. While Goldman remains bullish on the greenback, others are less hopeful. Brown Brothers Harriman & Co and Societe Generale SA are expecting any future performance of the USD to be heavily dependent on the release of positive economic data.
The US Dollar spot index has been steadily declining in 2016, from January highs to April lows. But the recent performance of the US Dollar Index indicates that a sharp appreciation in the greenback is taking place. As monetary policy in the US begins to normalize, Goldman Sachs believes that the USD will begin to appreciate. In terms of how much it could appreciate, a figure of 15% has been bandied about within the next 2 years. But Goldman’s forecasts on dollar strength have not always paid dividends and investors are mindful of the shortcomings of this investment bank’s projections. Back in February, the investment group went long on the USD against the JPY and the EUR, only to lose 5% in the process.
