NEW YORK: The dollar rallied against major currencies including the euro and Swiss franc on Wednesday following surprisingly strong employment data that suggested underlying US economic health.
US employers added 130,000 jobs in January, surpassing the 70,000 jobs that economists polled by Reuters had estimated, and indicating that the Federal Reserve would continue holding off on further rate cuts.
The unemployment rate fell to 4.3 percent in January from 4.4 percent in December, according to the US Labor Department. The dollar rose 0.63 percent to 0.77280 against the Swiss franc. The euro down 0.30 percent against the dollar at USD1.185975. The dollar index rose 0.16 percent to 97.07, on track to snap three straight sessions of losses.
“The dollar is rallying on the back of a much stronger-than-expected jobs report and firm earnings, said Joel Kruger, market strategist at LMAX Group in London.
“While risk assets are also higher as the data trims but does not derail expectations for a June Fed cut, creating a near best-case outcome for both the buck and broader markets.” Ahead of the jobs data, traders had been speculating that the number could be on the low side, which was seen as negative for the dollar.
That narrative was supported by data showing slower-than-expected retail sales in December on Tuesday and following comments from White House economic adviser Kevin Hassett on Monday that Americans could see smaller job growth numbers in the coming months.
Markets are now pricing in a 94 percent chance that the Fed will leave rates unchanged at its next meeting, up from 80 percent from the previous day, according to the CME’s FedWatch tool. “There still is some skepticism towards the dollar but recognizing that the market was leading the wrong way ahead of the jobs data,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“The market is still pricing in 50 basis points of cuts this year. If Kevin Warsh gets confirmed on time as Fed chair, his first meeting will be in June, where markets have gone from pricing in a 97 percent chance of a cut to about 70 percent.” Sterling was up 0.14 percent against the dollar to USD1.3659.
The Japanese yen continues to outperform in the aftermath of Prime Minister Sanae Takaichi’s landslide election victory although the currency has pared some of those gains against the dollar. The yen strengthened 0.68 percent against the greenback to 153.34 per dollar, on track for the third straight session of gains.
The yen was also stronger against the euro and was last up nearly 1 percent at 181.945, poised for the third consecutive session of gains against the single currency.
The Australian dollar rose to a three-year high after Reserve Bank of Australia Deputy Governor Andrew Hauser said inflation was too high and policymakers were committed to doing whatever was necessary to bring it to heel. The Aussie was last up 0.42 percent versus the greenback to USD0.7103. It rose as high as USD0.71360, reaching its highest level since February 2023. The Swedish crown was down 0.36 percent versus the dollar to 8.925. The dollar strengthened 0.01 percent to 6.913 versus the offshore Chinese yuan.
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