The euro neared parity with the dollar on Friday, as traders bet on the prospect of a eurozone recession caused by soaring inflation.
The haven yen firmed against the dollar following the assassination of Japan’s former prime minister, Shinzo Abe, before falling back.
Wall Street and European equity markets were higher although data showing the US job market is holding up well also raised the chances of further aggressive interest rate hikes to combat inflation.
There were 372,000 new positions added in the month, the Labor Department reported, far more than economists expected.
The strong health of the jobs market gives the US Federal Reserve more of a free hand to raise interest rates sharply to combat soaring inflation.
“In our view, today’s payrolls report, which shows only a mild slowing in the labour market, increases the chances of the Fed hiking by 75 basis points at its next meeting on 26-27 July,” said Daniel Vernazza, chief international economist at UniCredit Bank.
Last month, the Fed raised interest rates by an aggressive 75 basis points, or 0.75 percentage points.
Concern by investors that the fast pace of monetary tightening by the Fed will tip the world’s top economy into recession has seen stocks swoon in recent weeks.
While the prospect of higher interest rates usually pushes stocks down, and Wall Street did open lower, equities pushed higher as the morning continued.
That was in part relief by investors that the jobs report shows the economy is holding up better than many feared, said Edward Moya at Oanda trading platform.
“Traders couldn’t remain that bearish over news that the consumer is better-off than what many were fearing,” he said.
The euro on Friday slumped to $1.0072, a fresh 20-year low, before recovering back above $1.01.
“The depreciation in the euro to its lowest level in almost two decades against the dollar this week in large part reflects investors’ view that the ECB will tighten less aggressively than the Fed,” said Jessica Hinds, senior Europe economist at Capital Economics.
In commodities trading on Friday, world oil prices rose following the publication of the US jobs report comforted worries about the health of the world’s top economy, and demand for oil.
The rise comes at the end of yet another volatile week for crude and assets in general as investors fear recession fears aggravated and faded.
Asian stock markets closed higher, boosted by hopes that US President Joe Biden would remove some tariffs from Chinese goods.
Equities won a lift also from reports Beijing was considering a huge stimulus push to the struggling Chinese economy by allowing local governments to raise billions of dollars through bond issuance for infrastructure projects.
– Political upheaval –
Markets are also tracking political unrest in Britain and Japan.
London’s benchmark FTSE 100 index edged 0.1 percent higher — and the pound was mixed — one day after Prime Minister Boris Johnson said he was stepping down later this year following a string of scandals.
In Japan, Abe was assassinated on Friday by a gunman who opened fire at close range as the hugely influential politician delivered a campaign speech ahead of upper house elections.
The murder of the 67-year-old, who had been Japan’s longest-serving leader, stunned the nation and prompted an international outpouring of grief and condemnation.
The killing “could be negative for markets if the government’s policy, including its stance on monetary easing, is affected, as it was evident that he was pulling the strings behind the scenes in many ways”, noted Masahiro Yamaguchi at SMBC Trust Bank.
“If it becomes possible for (current Prime Minister Fumio) Kishida to carry out policies he wanted to, such as financial tax and regulations on share buy-back, that would be negative for markets.”
– Key figures at around 1530 GMT –
Euro/dollar: UP at 1.0182 from $1.0162 on Thursday
Pound/dollar: UP at $1.2032 from $1.2024
Euro/pound: UP at 84.62 pence from 84.49 pence
Dollar/yen: UP at 136.11 yen from 136.01 yen
New York – Dow: UP 0.3 percent at 31,489.46 points
EURO STOXX 50: UP 0.5 percent at 3,506.55
London – FTSE 100: UP 0.1 percent at 7,196.24 (close)
Frankfurt – DAX: UP 1.3 percent at 13,105.23 (close)
Paris – CAC 40: UP 0.4 percent at 6,033.13 (close)
Tokyo – Nikkei 225: UP 0.1 percent at 26,517.19 (close)
Hong Kong – Hang Seng Index: UP 0.4 percent at 21,725.78 (close)
Shanghai – Composite: DOWN 0.4 percent at 3,356.08 (close)
Brent North Sea crude: UP 2.3 percent at $107.08 per barrel
West Texas Intermediate: UP 1.9 percent at $104.67 per barrel
