US Dollar Index (DXY) Slumps Amid Disappointing ADP Numbers, Falling Treasury Yields

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The US dollar is weakening in the middle of the trading week as it joins the slump in the broader financial markets. From a disappointing private payrolls jobs report to an increasing number of COVID-19 variants, investors are beginning to get scared of what lies ahead in the coming months. Will it be a rough ride heading into the fall?

In July, the private sector added 330,000 workers, falling short of the median estimate of 693,000, according to the latest ADP report. This was also well below the 680,000 gains in June and represented the slowest pace in job creation since February.

The service sector created 318,000 new positions, led by leisure and hospitality, health care, education, and professional and business services. The goods industry added only 12,000 jobs, buoyed by manufacturing and mining.

“The labor market recovery continues to exhibit uneven progress, but progress nonetheless. July payroll data reports a marked slowdown from the second quarter pace in jobs growth,” said Nela Richardson, the chief economist at ADP, in a statement. “Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new COVID-19 concerns tied to viral variants. These barriers should ebb in coming months, with stronger monthly gains ahead as a result.”

In other economic data, mortgage applications tumbled 1.7% in the week ending July 30, according to the Mortgage Bankers Association (MBA). The 30-year mortgage rate slipped to 2.97%.

Moving forward, market analysts and investors are keeping a close eye on the Federal Reserve. Despite the official stance of maintaining loose policy and record-low interest rates, a growing number of central bank officials have started recommending tapering the ultra-aggressive quantitative easing program, especially with inflation running hot.

The US Treasury market was mostly in the red, with the benchmark 10-year yield down 0.037% to 1.137%. The one-year bill was unchanged at 0.066%, while the 30-year bond slipped 0.032% to 1.819%.

The US Dollar Index (DXY), which measures the greenback against a basket of currencies, fell 0.24% to 91.86, from an opening of 92.04. The index is down 0.5% on the week, paring its year-to-date gain to around 2%.

The USD/CAD currency pair rose 0.03% to 1.2543, from an opening of 1.2535, at 13:39 GMT on Wednesday. The EUR/USD climbed 0.26% to 1.1894, from an opening of 1.1867.

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