FX Roundup: Dollar takes a tumble on ISM, jobs data

The dollar headed lower against major crosses on Thursday, following a sequence of disappointing macroeconomic data.

The Institute for Supply Management’s US non-manufacturing purchasing managers’ index retreated from a reading of 53.5 in January to 53.4 in February; its lowest level in at least a year.

Nonetheless, that was better than the 53.1 which economists had pencilled in. Concurrently, Non-farm labour productivity decreased at a 2.2% annual rate in the fourth quarter of 2015, according to the US Bureau of Labor Statistics.

Together with a 1.1% rise in hourly compensation, the fall in productivity drove unit labour costs up by 3.3%. Jesse Hurwitz, analyst at Barclays, said, “Even after the upward revision, the four-quarter change in non-farm business output per hour remains tepid at 0.5%, in line with the five-year average.

"On balance, this morning’s report does little to change the fact that US productivity growth remains sluggish in the aftermath of the recession."

At 1539 GMT, the dollar was broadly flat against the yen, changing hands at JPY113.57. However, the euro and pound recovered ground, posting upticks of 0.53% and 0.48% versus the greenback, changing hands at $1.0926 and $1.4145 respectively.

Meanhwile, Capital Economics’ forecast remains that the pound will fall further against the dollar this year, to $1.30 from around $1.41 now. EUR/GBP cross moved 0.08% in favour of the Eurozone currency exchanging at £0.7725.

Kit Juckes, head of forex at Societe Generale, said, “The pound's short-covering bounce has run out of steam and after a trio of poor UK PMIs this week, I can't think of anything good to say about it.

"In broader terms, ‘Brexit’ is bad for UK growth and for the pound, and for European stability and for the euro. However, it is not as much of an issue this week is soggy global data, stable oil, or recovering risk sentiment.”

Elsewhere, selected commodity linked currencies gained some momentum. The greenback fell 0.07% against the Canadian dollar changing hands at CAD$1.3410. A plethora of other commodities currencies headed higher along with the loonie, particularly in Latin America, with the dollar falling 0.23%, 0.12% and 1.06% against the Colombian, Chilean pesos and the Brazilian Real respectively.

Finally, the Australian dollar rose 0.86% against the greenback exchanging at US$0.7358, after data released overnight suggested Australia’s real GDP growth was a solid 0.6% quarter-on-quarter in the fourth quarter of 2015, following 1.1% growth - revised up from 0.9% - in the previous quarter.

The New Zealand dollar also rose versus its US counterpart notching gains of 0.73% exchanging at US$0.6724.