Dollar flat after hitting three-week highs following US jobs data -January 05, 2024 at 10:02 am EST
* U.S. economy creates 216,000 jobs in December
* U.S. wage growth rises as well
* Fed funds futures reduce rate cut bets in March
* U.S. dollar on pace for best weekly rise since July 2023
NEW YORK, Jan 5 (Reuters) – The dollar was little
changed on Friday in choppy trading, coming off a three-week
peak, after data showed the world’s largest economy created more
jobs than expected last month, suggesting the Federal Reserve
would likely be in no rush to cut interest rates over the next
few months.
The dollar index hit 103.10, its highest since mid-December,
and was last flat at 102.4. On the week however, the
dollar gained 1.05%, on pace for its best weekly rise since last
July.
Data showed the U.S. economy generated 216,000 new jobs in
December, exceeding the consensus forecast of 170,000. The
unemployment rate was steady from November at 3.7%, compared
with expectations of a rise to 3.8%, while average earnings rose
0.4% on a monthly basis, against forecasts of a 0.3% gain.
“It’s obviously a strong report. The market (has) sniffed
out a strong jobs report over the past couple of days, so maybe
the reaction isn’t as strong as it could have been,” said Adam
Button, chief currency analyst at ForexLive in Toronto.
“In terms of the data itself, the revisions take a bit of
the shine off the headline number. It is more of a mixed bag
than it looks at first blush.”
U.S. rate futures have priced in about five rate cuts of 25
basis points each for 2024, with the year-end fed funds rate
expected at 4% compared with the current level of 5.25%,
according to LSEG’s rate probability app. Early this week, the
market had factored in six rate declines.
Post-data, rate futures traders have pared back easing bets
at the March meeting to around 59%, from about 68% to 70% over
the last week.
“We stand by our stance that calls for a first U.S. rate cut
in March are premature, and that the Fed will need to see more
evidence of a cooling in the jobs market, particularly in wages,
to have confidence in achieving its medium-term inflation
objective,” wrote Matthew Ryan, head of market strategy at
global financial services firm Ebury, in a note after the jobs
report.
In other currencies, the dollar climbed 0.3% against the yen
to 145.21. It rose as high as 145.98 yen, a three-week
peak. On the week, the greenback advanced 2.8%, on track for its
best weekly performance since May 2022.
The euro, on the other hand, was flat on the day at $1.0947
. Europe’s common currency fell 0.9% on the week, its
largest weekly drop since early December and snapping a run of
three weeks of increases.
Inflation across the 20-nation bloc jumped to 2.9% in
December from 2.4% in November, just shy of expectations for a
3.0% reading.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Karen Brettell and Joice Alves in London; Editing by Chizu
Nomiyama and Jonathan Oatis)
