Dollar Bid on Bumper U.S. Labour Market Data

Dollar outlook

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The U.S. Dollar went higher ahead of the weekend following the release of a consensus-busting jobs report out that showed the U.S. economy added 131K jobs in October.

The non-farm payroll report also showed that September's figure was revised higher to 167K. The October reading comes well ahead of market expectations for a more subdued reading of 80K, and explains why the Dollar reacted by going higher.

Coming in on the soft side was the average hourly earnings component of the report, which revealed pay growth of only 0.2% in October, where the market was looking for 0.3% growth.

The employment numbers will nevertheless justify this week's signal by the Federal Reserve that they see it fit to press the pause button on lowering interest rates. The rule-of-thumb goes that currencies are supported when their issuing central bank ends a cycle of interest rate cuts, and on balance this is therefore supportive of the USD outlook.

The Pound-to-Dollar exchange rate is quoted at 1.2945 at the time of writing, having traded as high as 1.2969 before the release of the numbers.

The Euro-to-Dollar exchange rate is quoted at 1.1132, having been as high as 1.1169 ahead of the release.

Danske Bank Research say the report comes in on the strong side of expectations with positive revisions and a rising labour force participation rate.

"Wage growth falls in the weaker side of camp but nothing dramatic, and yearly rate now at 3.0%. Rates higher and EUR/USD lower," say Danske.

"Nice upwards revision, sustained payroll growth. On the whole supports Fed's assessment that further cuts not needed yet. Trend of payroll growth has clearly slowed through, the days of 200k trend are well behind us. Question is if this is due to tight labor market or slowing demand," says Ranko Berich, head of research at Monex Europe.

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