The U.S. Dollar slunk close to a 2-year trough against the common currency Euro in the wake of an unexpectedly dismal labor data which dashed investors’ hopes that the Federal Reserve might begin to withdraw its stimulus measures later this year. According to the U.S. Labor Department only 148,000 new private sector jobs were added in September, far fewer than the 180,000 new jobs that were forecast.
As reported at 12:15 p.m. (JST) in Tokyo, the EUR/USD pair had traded at a session peak of $1.3792 before slipping to $1.3780. The EUR/JPY pair touched on a 4-year high yesterday, trading at 135.52 Yen at one point; more recently the pair was trading at 135.26 Yen. Analysts believe that the Euro’s momentum could begin to gather steam on expectations that the Eurozone economy is staging a stronger comeback. The U.S. Dollar Index slipped to an 8-month low, trading at 79.182 .DXY yesterday, and only inching up to 79.259 .DXY in Asian trade today.
Fed Tapering Expectations Revisited
Analysts also believe that the numbers suggest that the economic situation is likely to be worse than expected given that they occurred prior to the government shutdown which surely had a detrimental impact on the economy. Now that the labor data is in, bets on the Fed’s tapering are quickly being reversed, with many now believing that the Fed won’t reduce the current $85 billion in monthly bond purchases until perhaps the end of the 1st quarter of 2014.