11/12/2017 - US Jobs Data Outperforms Expectation 

USD

The dollar held on to gains on Friday after a report showed that job creation in the US economy grew by more than expected. The U.S non-farm payrolls showed that the change in the number of employed people for the month of November rose by more than expected to 228,000 as the labour market continues to shrug off disruptions resulting from the recent spate of hurricanes on the south coast. Analysts had original forecast the figure to post a reading of 198,000. 

However, upside in the currency was limited by disappointing data showed that average hourly earnings rose by only 0.2% in November, undershooting expectations of a 0.3% increase. The annual increase in wages was also lower than forecast with last months figure posting a reading of 2.5% compared to 2.7% a year earlier.

With a December rate hike heavily priced in ahead of this Wednesdays FOMC meeting, investors are likely to turn their focus on the impact of the disappointing wages data on the Feds monetary policy outlook for the next year. The US central bank’s last quarterly projection from September indicates three more hikes in 2018 despite the recent sluggish growth in wages which has resulted in subdued inflation.

GBP

The pound realised significant losses on Friday as investors took profit following a sharp rally in recent days which came off the back of a breakthrough in the Brexit negotiations. 

Last week saw significant pressure lifted from the shoulders of Prime Ministers May as the UK and EU struck a divorce deal that will now clear the talks to move forward to trade and transition arrangements. On Thursday both sides worked through the night into Friday morning to reach a deal over the status of the Irish border which scuppered an attempt to clinch a deal earlier in the week.

The newly reached agreement which pushed sterling to a six-month high against the euro has raised hopes for a more orderly Brexit however on Friday traders began to book profits, pushing sterling back down against both the dollar and the euro. 

With Britain’s economy still facing headwinds, the Bank of England’s trade-weighted sterling index also slipped 0.9 percent having previously hit a seven-month high.

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