Dollar Stabilizes; Euro Falls as Russia Sanctions Talk Ramps Up

The U.S. dollar stabilized Monday after last week’s strong jobs report, while the euro weakened as talk of additional sanctions on Russia for its invasion of Ukraine ramped up.

At 3:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded marginally lower at 98.612.

Friday’s much anticipated U.S. jobs report for March confirmed a strong economy and a tight labor market, with nonfarm payrolls increasing by 431,000 jobs last month while February’s release was revised higher to show 750,000 jobs added instead of the previously reported 678,000.

Additionally, the unemployment rate fell to a new two-year low of 3.6% and wages accelerated, providing room for the Federal Reserve to raise interest rates sharply in May.

That said, this was widely expected and Fed funds futures have already priced in a very strong chance of a 50 basis point hike next month. Bond yields have responded accordingly, with 2-year Treasury yields climbing near to 2.5%.

USD/JPY rose 0.2% to 122.72, with the yen falling again, following the heavy beating the Japanese currency took in March on the expectation of higher U.S. interest rates while Japanese rates remained anchored at rock bottom.

Elsewhere, EUR/USD fell 0.1% to 1.1044, weighed by talk of fresh sanctions on Moscow after Ukraine accused Russian forces of war crimes in the town of Bucha, something denied by Russia’s defense ministry.

German Defense Minister Christine Lambrecht said the European Union should talk about ending Russian gas imports, a subject the bloc has steered clear of so far, despite pressure from the U.S.

Such a move would have severe economic ramifications on the Eurozone, to the detriment of the single currency, as Russia supplies some 40% of Europe’s gas needs.

GBP/USD rose 0.2% to 1.3133, AUD/USD rose 0.2% to 0.7513 ahead of a Reserve Bank of Australia meeting on Tuesday, while USD/CNY was flat at 6.3634, with markets in mainland China closed for a public holiday.

USD/TRY rose 0.1% to 14.7037 ahead of the release of the latest Turkish inflation data, which are expected to raise the pressure on the lira.

Consumer prices are expected to climb an annual 61.5% in March from 54.4% a month earlier when released later Monday, according to the median of 19 estimates in a Bloomberg survey.

Turkey’s central bank, under pressure from President Recep Tayyip Erdogan, has chosen not to lift interest rates for the last three months, meaning Turkey’s interest rates are the world’s lowest when adjusted for prices.