The US dollar is sliding after shocking data (Daily analysis 10.05.2021)

Shocking data from the US labour market pushed the EUR/USD pair towards 1.2150. The greenback continues to trade on the backfoot as all of the 25 most important currencies have gained since the beginning of the month.

The high appetite for risk is reflected in new historic highs on Wall Street and all-time highs in copper prices. The external environment is clearly (and more than before) supporting the strengthening of currencies from the emerging markets basket. The South African rand and the Russian ruble emerge as clear outperformers, with the latter erasing the majority of April's plunge.

Shocking labour market report hits the dollar

In April, the US economy added a mere 266,000 new jobs. The bar of expectations was suspended many times higher, at the ceiling of round one million jobs recovered after the pandemic. The unemployment rate, instead of falling, rose to 6.1%. As if that wasn't enough, the change in employment for the previous months was heavily revised down. The data are inconsistent with the number of newly registered jobless claims, which have steadily declined to below 500,000, and a number of other indexes reflecting the economic situation in individual industries. Therefore, it should be assumed that the demand for labour is very strong, but there have been problems with the availability of the workforce. Very frequent claims are that these are largely due to the extension of crisis unemployment benefits up to September and childcare-related layoffs.

Regardless of the actual reasons for the slowdown in the labour market recovery, the latest information from the economy does not put pressure on the Federal Reserve to abandon its crisis policy any faster. Neither do they encourage investors to once again contest the monetary authorities' stated patience before the tightening course. The Fed wants to see clear progress before discussing cutting off the monetary stimulus. In the meantime, there are still about 8 million fewer people working than before the crisis (one-third of the jobs lost). This means that it is difficult to look at the prospects for the dollar constructively. There is a confirmation of the assessment that the dollar's appreciation in the first quarter was a correction in a long-term downward trend. In the current environment, assets and currencies of emerging economies have the potential to catch up, and the zloty's attractive valuation may be its asset.