The much-awaited US employment data revealed to be weaker than expected, with slowed jobs growth in August after two straight months of strong gains and wage gains moderated.
In effect, this just slashed prospects for an interest rate hike from the Federal Reserve this September. Dollar came crashing after the report.
According to the Labor Department on Friday, US nonfarm payrolls rose by 151,000 jobs in August after an upwardly revised increase of 275,000 in the preceding month. Hiring in the sectors of manufacturing and construction were reduced.
Meanwhile, unemployment rate was left unchanged at 4.9% as more people entered the US labor market.
In a Reuters poll, economists had a consensus forecast of payrolls escalating 180,000 in the month prior and the unemployment rate sliding one-tenth of a percentage point to 4.8%.
Effect on Hiking Rates
Mohamed el-Erian, Allianz chief economic adviser, stated that the mixed employment data places the US central bank in a rather difficult situation. “It’s not all around strong enough to assure a September interest rate hike. But it’s solid enough to engender a heated policy discussion.”
August’s jobs gains could still be ample to make the Fed hike interest rates in December, nonetheless. The increase in payrolls underpins views that the world’s largest economy has recovered speed after nearly stalling in the first half of 2016.
Today’s report came more than two weeks before the Fed’s September 20-21 policy meeting. Prospects for both September and December rate hikes surged after Fed Chair Janet Yellen said in her speech that the case for raising interest rates had strengthened in recent months.
Markets had priced in a 27% chance of a September rate hike and 57.7% for December odds, based on the CME Fedwatch tool.
"As far as the Fed is concerned, I don't think it's a number that is a major setback for what they ultimately want to achieve, which is a slow and gradual pace for a rate normalization," stated Jason Celente, senior fixed income portfolio manager at Insight Investment in New York.
While global stock rose on Friday’s US nonfarm rolls data, the greenback fell weaker against its rivals. Nonetheless, as of 14:25 GMT, the US Dollar Index is in the green with 0.15% to 95.80. Earlier today, it tumbled 0.24% to 95.432, the lowest level since last Friday.
Viewing the daily chart for the US dollar, the first green arrow indicates Yellen’s remarks which visibly brought the dollar higher until yesterday, when it stalled ahead of Friday’s jobs growth data.
USD seems barely changed with a measly increase for today, but the indicators below are pointing downwards. We are expecting that this may likely turn the dollar lower in the latter part of the session.
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