US Dollar Strengthens After US NFP Report

The US dollar strengthened after the release of US Non Farm Payroll (NFP) data. However, the more influencing factor was the Russo-Ukrainian war because it raised the issue of a nuclear explosion.

The US dollar rose after the US Non Farm Payroll (NFP) data was reported to increase. In the trading session on Friday (04/March) evening, the US Dollar Index shot 0.95% to 98.65, its highest level since May 2020.

US NFP added 678K in February 2022, higher than expected 400K. The gain was at the same time the highest since the last five months.

Not only NFP, US Unemployment Rate also improved from 4.0% to 3.8%. However, the Average Hourly Wages in the US was only 0.0%, missing expectations of 0.5% and down from the previous period at 0.6%. However, wages on an annual basis rose 5.1% as companies increased workers' wages in light of rising inflation.

"The data is an additional signal (showing) that the real economy is gaining momentum," commented Capital Economics economist Michael Pearce, "It will give the Fed even more confidence to roll out its monetary tightening plans. But with wage growth currently subdued, aggressive rate hikes over the next few months will be in question."

Yesterday's testimony by the Chair of the Fed, Jerome Powell, stated that the employment sector was extremely tight. He also supports a 25 bps rate hike at the FOMC meeting on March 14-15, and is prepared to be more aggressive if inflation persists.

Nuclear Explosion at Ukraine Nuclear Power Plant Hits Euro

Regardless of the US economic conditions, the situation in Ukraine is heating up after Russian troops reportedly occupied a number of nuclear bases in Ukraine. Ukrainian President Volodimyr Zelensky instead alleged that Russia deliberately started the fire at the Zaporizhzhia nuclear power plant and increased the risk of a nuclear explosion similar to the Chernobyl tragedy.

The news made the euro and ruble slump, giving the US dollar the upper hand. Neil Jones of Mizuho Securities confirmed that the epicenter of risk aversion still lies with the euro. This is because the increase in energy prices in Europe is getting crazier because of the war and the ECB is still reluctant to change monetary policy. EUR/USD is now trading at 1.0913, back to a two year low.