FX market outlook

The dollar weakened further today after US President Donald Trump said in an interview with the Wall Street Journal that the greenback is “getting too strong”. The Australian dollar was a strong performer on the back of a solid jobs report.

Trump expressed his concern that US businesses, especially manufacturers, won’t be able to compete with other countries since American goods would be more expensive when the dollar’s value is too high.

Meanwhile, the US President also remarked that he likes the Federal Reserve’s low interest rate policy and is leaving open the possibility of nominating Fed Chair Janet Yellen again when her term ends next year. He also said that he will not label China a currency manipulator.

Overall, Trump’s comments pushed the dollar lower. The dollar index, which gauges the US currency against a basket of six major counterparts, dipped below the key 100 level during the Asian session to reach its lowest level this month. Against the yen, the dollar extended losses to reach a fresh five-month low of 108.71 in the Asian session.

Meanwhile, adding to dollar weakness was a rise in US Treasuries as investors sought safe havens in a risk averse environment. Geopolitical risk continued to dominate the markets due to the possibility of US military action against Syria and North Korea.

The Australian dollar shrugged off geopolitics as the focus was on domestic data which showed more jobs created in Australia in March. A total of 60,900 jobs were added to the economy last month, reversing February’s drop of 6,400 and beating forecasts of 20,000.

The aussie jumped after the data and was given an added boost after upbeat Chinese trade data. AUD / USD reached a session high of $0.7594. China is Australia’s major trading partner.

The broadly weaker greenback lent support to the euro and to sterling, which both rose on the back of Trump’s comments later yesterday. The euro was back in the $1.0600 handle while cable reached its highest level this month at $1.2573.

Gold benefitted from a weaker dollar and hit a new five-month high of $1287.81 early in the session.

Oil prices slipped on concerns about rising US output, with WTI oil dipping back below $53 a barrel while Brent crude traded below $56 a barrel.

Looking ahead to the rest of the day, focus will be on economic releases out of the US, which include jobless claims and the University of Michigan consumer sentiment report.