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USD: high NFP, high USD

During the past week US dollar strengthened versus its counterparts. We now see a picture we don’t see often: USD has weekly gains in all major pairs.

The greenback was helped by the growth worries in the euro zone and China, geo-political risks as well as concerns about the effects of the Federal Reserve normalizing monetary policy. USD is stronger versus both lower- and higher-yielding currencies. The Federal Reserve will hike interest rates well before the ECB and Bank of Japan – this is a certain thing. This pulls euro and yen down. And the commodity currencies are affected by risk aversion.

At first data from the US wasn’t very bright: ISM Manufacturing PMI declined, and so did factory orders and consumer confidence. However, American labor market has outshined everything: Non-Farm Payrolls rose by 248K versus 215K expected. Moreover, the unemployment rate fell from 6.1% to 5.9%.

In our view, this strong labor market will set the tone for the month ahead. US dollar is to continue gaining versus its competitors. Next week focus on the release of the FOMC September meeting minutes on Wednesday. At that meeting the Fed members gave higher forecasts for the main interest rate than in June.

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