The U.S. dollar index (DXY) fell to a 7-week low on Friday, ending down 0.41%, following an unexpected drop of 23,000 in July nonfarm payrolls, contrary to expectations of an 80,000 increase. This marked the first decrease in payrolls in five months, while the unemployment rate unexpectedly dropped by 0.1 percentage points to 4.1%. The probability of a Federal Reserve rate hike in September decreased to 44%, down from 58%.
In contrast, the euro rose to a 7-week high against the dollar, bolstered by stronger-than-expected German trade data, with June exports increasing by 0.9% and imports by 4.4%. Markets are pricing in an 85% likelihood of a 25 basis point rate hike by the European Central Bank at its next meeting on September 10. Meanwhile, the Japanese yen gained against the dollar, closing down 0.57% due to lower U.S. Treasury yields and comments from U.S. officials regarding potential currency market intervention.
Following the weak U.S. labor data, gold prices rose by 2.32%, hitting a 7-week high, while silver increased by 3.07%. This rally was supported by the People’s Bank of China adding 640,000 ounces to its gold reserves, the largest increase in over 2.5 years, indicating strong central bank demand amid a generally bearish market for precious metals.
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