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 dollar 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 analyst at Allianz 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.”
================================================== == ======
Coin offer prices at 12:20 PM (1620 GMT)
(Reporting by Gertrude Chavez-Dreyfus) Additional reporting by Saqib Iqbal Ahmed. Editing by Mark Porter, Kirsten Donovan
Our standards: Thomson Reuters Trust Principles.