08/05/2018 - Dollar Gains After Unemployment Falls

USD

The dollar reached four-month highs against its major rivals on Friday after the release of a mixed jobs report that showed job creation fell in April although the unemployment rate also fell to 3.9%, its lowest level since December 2000.

The report also showed that wage growth remained subdued with a 2.6% rise year-on-year. Analysts had originally expected the figure to post a reading of 2.7%.

Wage pressures have been closely monitored by the US central bank for signs of an improvement in labour market which would push inflation closer to its target level.

However despite the weak data, markets still expect the Fed to stick to it’s tightening path with the next rate increase expected in June with another to follow in September. There is now a 40% chance that of a fourth rate hike at the end of the year.

The disappointing wage data comes at a time when the jobless rate is at its lowest level in 17 years when wage inflation was running at 4.3%. This contrasts significantly from the current 2.6%.

Economists consider growth of 3% or more to be consistent with rising inflation. Nonetheless many analysts are still of the belief that tightening in the labour market in the US will eventually push wage pressures beyond this level.

Key Announcements

08:15 - USD; Fed Chair Powell Speaks in Zurich