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3 Reasons Why U.S. Dollar Shrugged Off Weak Payrolls

By Kathy LienForexDec 03, 2021 04:44PM ET
www.investing.com/analysis/3-reasons-why-us-dollar-shrugged-off-weak-payrolls-200610428
3 Reasons Why U.S. Dollar Shrugged Off Weak Payrolls
By Kathy Lien   |  Dec 03, 2021 04:44PM ET
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Job growth in the U.S. slowed significantly last month, with non-farm payrolls rising by only 210,000 in November, down from 546,000 in October. This was less than half of the 550,000 consensus forecast. The U.S. dollar sold off when the numbers came out but recovered quickly for three reasons:
 
1. The unemployment rate dropped to 4.2%, its lowest level since the pandemic. Economists had been looking for a more modest improvement, but the uptick in the participation rate tells us that this was not a reflection of workers dropping out of the labor force.
 
2. In total, the U.S. economy has recovered more than 80% of the jobs lost since the pandemic.
 
3. Federal Reserve rate hike expectations remained intact, with the futures market pricing in 25bp hike in June and 50bp hike in November.
 
While we are not enthused by the slowdown in average hourly earnings, the U.S. dollar recovered its losses quickly because there’s enough good news in today’s report for the Fed to accelerate its taper plans this month. Service sector activity also improved, with the ISM index rising to 69.1 from 66.7. 
 
In contrast, Canadian labor market numbers were very strong. More than 150,000 people found new work in November, five times greater than the previous month and significantly better than the 35,000 forecast. The unemployment rate also dropped to 6% from 6.7%, its lowest level since February 2020. USD/CAD fell sharply on the back of the weaker U.S. and stronger Canadian reports. We would not be surprised if the November jobs report marked a quadruple top for USD/CAD. Today’s strong jobs number should keep the Bank of Canada, which has a policy meeting next week, hawkish.
 
The Australian and New Zealand dollars fell sharply on the back of a stronger U.S. dollar and weaker Chinese data. China’s Caixin Composite and Services PMI indices declined in November – a sign that economic activity in slowing is the world’s second largest economy. The Reserve Bank of Australia has a monetary policy announcement next week. Between Omicron, equity market volatility and Chinese data, we expect the RBA to remain cautious.
 
Downward revisions to Eurozone and U.K. PMIs drove the euro and sterling lower. GBP fell more aggressively than EUR after Bank of England policy member Michael Saunders said the economic impact of Omicron is a key consideration for their December meeting. Looking ahead, aside from the rate decisions, the German ZEW survey, U.K. industrial production and monthly GDP report are also numbers to watch. For the U.S., the main focus will be on the November consumer price index and the December University of Michigan consumer sentiment report.
3 Reasons Why U.S. Dollar Shrugged Off Weak Payrolls
 

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3 Reasons Why U.S. Dollar Shrugged Off Weak Payrolls

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Comments (7)
Oldfashioned Owl
Oldfashioned Owl Dec 04, 2021 4:25AM ET
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Good insight Kathy. Folks with too much conspiracy are too blind to see. The irrational boomer lot don't look at the progress mankind has made in material world & doomsday callers will continue their USD hate. What matters is continuous progress of mankind with science & innovation.
Jouni Matero
Jouni Dec 04, 2021 3:04AM ET
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This article can be easily shrugged off.
Raghu Bhupasamudram
Raghu Bhupasamudram Dec 04, 2021 1:06AM ET
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incisive and useful. thank you.
Belal Abusaad
Belal Abusaad Dec 03, 2021 5:37PM ET
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well at the end, it's all about the oil prices in USD dollar..🔁...so lowering the oil prices required a strong dollar for a short term
Mehena Louai
Mehena Louai Dec 03, 2021 5:37PM ET
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just cause oil's price is denominated in usd , that doesn't mean whenever usd is strong the oil will go down or the opposite .
Joshua Happiness
Joshua Happiness Dec 03, 2021 5:36PM ET
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nice work
Mana Razazipour
Mana Razazipour Dec 03, 2021 4:55PM ET
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Wonderful! Tell us about the end of market, why U.S. dollar fell?
Charlie Wang
Charlie Wang Dec 03, 2021 4:55PM ET
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JPY
CAIN MARTIN
CAIN MARTIN Dec 03, 2021 4:47PM ET
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Great info as always!
 
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