At the end of the trading week, the Naira witnessed significant losses against the US dollar as investors ramped up their demand for the greenback.
In the black market, the Naira depreciated against the dollar, slipping from N1,485 on Thursday to N1,495 on Friday. Short sellers aimed to breach the critical N1,500/$ support level once more.
Similarly, according to FMDQ data, the local currency declined against the dollar in the unofficial market on Friday, dropping to N1483.99 from N1481.49 on Thursday.
These fluctuations occurred despite an uptick in the volume of foreign exchange transactions, rising from $213.31 million on Thursday to $269.27 million on Friday.
Strong Job Data in the United States
The US economy recorded a substantial increase in job creation last month, surpassing expectations and driving up the value of the US dollar on Friday. This development raised the possibility of the Federal Reserve delaying its year-long easing cycle.
The dollar index, which measures the greenback’s strength against six major currencies, including the euro, surged by 0.8% to reach 104.91 index points on Friday, marking its most significant daily gain since April 10.
The robust jobs report bolstered the index by 20 basis points for the week, countering previous concerns over the Fed’s potential rate cuts in 2024.
According to data, nonfarm payrolls in the US increased by 272,000 jobs last month, surpassing economists’ expectations of a 185,000 gain. However, adjustments revealed that 15,000 fewer jobs were created in March and April combined than initially reported.
Average hourly wages also rose by 0.4% in May, following a 0.2% decline in April. In the 12 months ending in May, annual growth was recorded at 4.1%.
Despite the positive job data, the unemployment rate increased slightly from 3.9% to 4% in April, ending a 27-month streak of consecutive declines.
Market Outlook
The DXY index’s breakout above key Simple Moving Averages (SMAs) of 20, 100, and 200 days suggests a potential turnaround in its performance. The Relative Strength Index (RSI) rising back above 50 indicates bullish momentum, while the Moving Average Convergence Divergence (MACD) suggests increased buying activity.
DXY bulls must hold the crucial resistance level at 104.40, reclaimed following the positive jobs report to maintain a bullish view.
The Federal Open Market Committee (FOMC) is not expected to make any changes in its upcoming policy meeting. Based on LSEG’s rate likelihood tool, the likelihood of a rate cut in September decreased to roughly 50.8% after the jobs report, down from 70% late on Thursday.
The rate futures market has priced in only one 25 basis point decrease this year, likely at the November or December meeting.
