Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Dollar firms as US jobs report backs Fed hike in May

Published 04/07/2023, 08:58 AM
Updated 04/07/2023, 12:40 PM
© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
DX
-

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The dollar strengthened on Friday after data showed an increase in jobs in the world's largest economy last month, suggesting that the Federal Reserve may have to raise interest rates next month.

Prior to the jobs report, the rate futures market had been betting that the Fed would pause at the May policy meeting. The market has now priced in a 70% chance the Fed will raise interest rates by 25 basis points (bps), though multiple rate cuts have also been factored in by the end of the year.

    Friday's data showed U.S. nonfarm payrolls increased 236,000 in March, in line with forecasts of 239,000. Data for February was revised higher to show 326,000 jobs were added instead of 311,000 as previously reported.

The unemployment rate fell to 3.5% from 3.6% in February. Average hourly earnings, which reflect wage inflation, rose 0.3% in March after gaining 0.2% in February.

"Federal Reserve officials are likely to continue delivering their higher-for-longer message in the run-up to the May policy meeting, supporting expectations for a final rate hike and putting a floor under the dollar," said Karl Schamotta, chief market strategist at Corpay in Toronto.

"That said, recent data would suggest that the economic risk backdrop is turning more negative - if inflation and retail sales numbers disappoint in coming weeks, all bets are off," he added.

Liquidity has thinned in the hours following the release of the jobs number ahead of the Easter weekend. Some European markets are also closed on Monday.

In afternoon trading, the dollar index rose 0.1% to 102.03. Against the yen, the dollar was up 0.3% at 132.10 yen while the euro was 0.1% weaker at $1.0910.

The greenback gained 0.2% versus the Swiss franc to 0.9049 francs. Sterling likewise fell against the dollar, down 0.2% at $1.2412.

Analysts also said that while the jobs report showed strong gains, there are sectors that have seen moderate declines specifically the manufacturing and construction industries.

"(This) should be an encouraging sign to the Fed some effects of monetary policy are starting to take hold," said Charlie Ripley, senior investment strategist, at Allianz (ETR:ALVG) Investment Management in Minneapolis, in emailed comments.

With nonfarm payrolls out of the way, investors are now focused on the U.S. consumer price index (CPI) for the month of March. Economists polled by Reuters expect core CPI of 0.4% last month and 5.6% on a year-on-year basis.

Tom Simons, U.S. economist, at Jefferies, wrote that he expects CPI "will continue to show uncomfortably high core inflation pressure."

========================================================

Currency bid prices at 12:20PM (1620 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 102.0200 101.9100 +0.14% -1.420% +102.3000 +101.8700

Euro/Dollar $1.0910 $1.0921 -0.11% +1.82% +$1.0922 +$1.0876

Dollar/Yen 132.1000 131.7700 +0.28% +0.79% +132.3650 +131.5200

Euro/Yen 144.17 143.88 +0.20% +2.76% +144.1900 +143.6000

Dollar/Swiss 0.9049 0.9045 +0.10% -2.08% +0.9080 +0.9035

Sterling/Dollar $1.2412 $1.2438 -0.18% +2.67% +$1.2455 +$1.2390

Dollar/Canadian 1.3501 1.3493 +0.18% -0.24% +1.3530 +1.3487

Aussie/Dollar $0.6651 $0.6673 -0.12% -2.22% +$0.6691 +$0.6641

Euro/Swiss 0.9875 0.9879 -0.04% -0.20% +0.9890 +0.9862

Euro/Sterling 0.8788 0.8777 +0.13% -0.63% +0.8790 +0.8766

NZ $0.6232 $0.6245 +0.04% -1.61% +$0.6270 +$0.6210

Dollar/Dollar

Dollar/Norway 10.4820 10.4410 +0.37% +6.79% +10.5140 +10.4540

Euro/Norway 11.4485 11.3992 +0.43% +9.10% +11.4640 +11.4025

© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

Dollar/Sweden 10.4578 10.4224 +0.16% +0.48% +10.4762 +10.4219

Euro/Sweden 11.4067 11.3883 +0.16% +2.31% +11.4216 +11.3787

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.