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Dollar Falls After Nonfarm Payrolls; Rising U.S.-China Trade Woes Weigh

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The U.S. dollar drifted lower against its key counterparts in the European session on Friday, after the July job growth came in line with forecasts and as the trade spat between the U.S. and China escalated following Beijing's threat to impose countermeasures, if Washington proceeds with its proposed tariff hike.

Data from the Labor Department showed that the non-farm payroll employment climbed by 164,000 jobs in July after a downwardly revised jump of 193,000 jobs in June.

Economists had expected employment to increase by 164,000 jobs.

The unemployment rate held steady at 3.7 percent in July, unchanged from June, and in line with economists' estimates.

Elsewhere, China warned of retaliatory measures against the U.S. in order to defend its core interests, adding that its consequences must be borne by Washington.

Beijing's announcement came a day after the U.S. President Donald Trump proposed to impose 10 percent tariffs on $300 billion of Chinese imports, starting September 1.

The additional tariffs will cover almost all the goods imported from China into the United States.

Trump's decision came after the stalled trade talks in Beijing. The U.S. President blamed his Chinese counterpart Xi Jinping of breaking the latter's pledge to buy U.S. agricultural goods.

Investors fear that the Federal Reserve would cut interest rates again to support the economy from the trade war uncertainty.

On the economic front, data from the Commerce Department showed that the U.S. trade deficit was little changed in the month of June.

The Commerce Department said the trade deficit narrowed slightly to $55.2 billion in June from a revised $55.3 billion in May.

The US dollar has been declining against its most major counterparts in the Asian session on Trump's tariff threat against Beijing.

The greenback shed 0.7 percent to over a 7-month low of 106.61 versus the yen from Thursday's closing value of 107.33. Next immediate support for the greenback is seen around the 104.00 level.

The minutes from the Bank of Japan's monetary policy session, held on June 19-20, showed that policymakers discussed further easing as most of them shared the view that it was appropriate to persistently continue with the powerful monetary easing.

"The key to overcoming deflation was for the Bank to maintain its stance of taking some kind of policy response if any changes emerged in the baseline scenario of the outlook for prices," the minutes said.

The greenback depreciated to a 9-day low of 0.9837 against the Swiss franc, down by 0.7 percent from Thursday's closing value of 0.9903. The greenback is seen finding support around the 0.96 level.

In Europe, figures from the Federal Statistical Office showed that Switzerland's consumer price inflation eased more than expected in July.

Consumer prices climbed 0.3 percent year-on-year, following a 0.6 percent rise in June. Inflation was forecast to slow moderately to 0.5 percent.

After an uptick to 1.2089 against the pound at 9:00 pm ET, the greenback pulled back 0.5 percent to 1.2144 following the data. Should the greenback weaken further, it may find support around the 1.27 level.

Survey data from IHS Markit showed that the UK construction sector continued to shrink in July.

The IHS Markit/Chartered Institute of Procurement & Supply construction Purchasing Managers' Index rose to 45.3 in July from June's ten-year low of 43.1. The score was forecast to climb to 46.0.

In contrast, the greenback bounced off 0.3 percent to 1.1078 a euro, after having dropped to a two-day low of 1.1115 at 3:55 am ET. On the upside, 1.09 is possibly seen as the next resistance level for the greenback.

Data from Eurostat showed that Eurozone producer price inflation eased notably in June largely due to weak energy prices.

Producer price inflation slowed to 0.7 percent in June from 1.6 percent in May. The rate was below the forecast of 0.8 percent.

The U.S. dollar appreciated to over a 6-week high of 1.3266 against the Canadian dollar, after dropping to 1.3205 at 5:00 pm ET. The greenback may possibly challenge resistance around the 1.34 level.

Continuing its early rally, the greenback rose 0.4 percent to a 7-month high of 0.6775 versus the Australian dollar, from Thursday's New York session close of 0.6799. Further uptrend may take the greenback to a resistance around the 0.66 level.

The greenback gained 0.7 percent against the New Zealand dollar, touching a 1-1/2-month high of 0.6505. The pair had ended Thursday's trading session at 0.6550. The greenback is likely to face resistance around the 0.64 level, if it rallies again.

Survey data from ANZ showed that New Zealand's consumer confidence deteriorated in July. The consumer confidence index fell to 116.4 in July from 122.6 in June.

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