© Reuters. FILE PHOTO: US dollar banknotes are shown in this illustration taken on February 14, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
By Gertrude Chavez-Dreyfus
NEW YORK (Reuters) – The dollar rose on Friday after data showed an increase in jobs in the world’s largest economy last month, suggesting the Federal Reserve may have to raise interest rates next month.
Ahead of the jobs report, the rate futures market was betting that the Fed would pause at the May policy meeting. The market has now priced in a 70% chance that the Fed will raise interest rates by 25 basis points, even though multiple rate cuts are already factored in by the end of the year.
Friday’s data showed US nonfarm payrolls increased by 236,000 in March, in line with expectations of 239,000. February data was revised upward to show that 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 rising 0.2% in February.
“Fed officials will likely continue to deliver their higher-for-the-longer message in the run-up to the May policy meeting, supporting expectations of a final rate hike and a floor for the dollar,” said Carl Chamota, chief market strategist. In Corby, Toronto.
He added, “However, recent data suggests that the economic risk backdrop is turning more negative – if inflation numbers and retail sales disappoint in the coming weeks, all bets are off.”
Liquidity weakened in the hours after the jobs numbers were released before the Easter break. Some European markets were also closed on Monday.
In afternoon trading, the index rose 0.1%, to 102.03. Against the yen, the dollar rose 0.3% to 132.10 yen, while the euro fell 0.1% at $1.0910.
The dollar rose 0.2% against the Swiss franc, to 0.9049 francs. The pound sterling similarly fell against the dollar, down 0.2% at $1.2412.
Analysts also said that while the jobs report showed strong gains, there were sectors that saw moderate declines specifically the manufacturing and construction industries.
“(This should) be an encouraging sign for the Fed, some of the effects of monetary policy are starting to take hold,” Charlie Ripley, chief investment strategist at Allianz (ETR:) Investment Management in Minneapolis, said in emailed comments.
With the Nonfarm Payrolls out of the way, investors are now focusing on the US Consumer Price Index (CPI) for March. Economists polled by Reuters had forecast core CPI of 0.4% last month and 5.6% year-on-year.
Tom Simmons, US economist at Jefferies, writes that he expects CPI to “continue to show uncomfortably high underlying inflation pressure.”
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Coin offer prices at 12:20 PM (1620 GMT)
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
previous change
a class
Dollar Index 102.0200 101.9100 +0.14% – 1.420% +102.3000 +101.8700
EUR/USD 1.0910 USD 1.0921 -0.11% + 1.82% + 1.0922 USD + 1.0876 USD
USD/JPY 132.1000 131.7700 +0.28% +0.79% +132.3650 +131.5200
EUR/JPY 144.17 143.88 +0.20% +2.76% +144.1900 +143.6000
USD/CHF 0.9049 0.9045 +0.10% -2.08% +0.9080 +0.9035
GBP/USD $1.2412 $1.2438 -0.18% + 2.67% + $1.2455 + $1.2390
USD/CAD 1.3501 1.3493 +0.18% -0.24% +1.3530 +1.3487
AUD/USD 0.6651 USD 0.6673 -0.12% -2.22% + 0.6691 USD + 0.6641 USD
EUR/CHF 0.9875 0.9879 -0.04% -0.20% +0.9890 +0.9862
EUR/GBP 0.8788 0.8777 +0.13% -0.63% +0.8790 +0.8766
0.6232 NZD 0.6245 NZD +0.04% -1.61% + 0.6270 NZD + 0.6210
dollars / dollars
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
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