Image: Official White House Photo by Adam Schultz.
There was not enough strength in the February U.S. jobs report to boost the Dollar into the weekend.
The Pound to Dollar exchange rate will record a solid weekly advance after the U.S. added 143K jobs in January, which was half of what was recorded in December and below expectations for 170K.
However, the Dollar found a bid as the details of the report were digested. GBPUSD spiked to 1.2490 as an initial reaction to the data but ultimately pared the gain to 1.2438, reducing the weekly advance to 0.40%.
The softer 143K rise in payrolls in January is negated by upward revisions to payrolls in November and December, which left the three-month average gain at a strong 237K.
The USD rebound was helped by an unexpected pullback in the unemployment rate to 4.0% from 4.1%. Wages were also strong, rising to 4.1% y/y in January from 3.9% in December, surpassing an estimate for 0.3%.
"The dollar is holding steady after an initial knee-jerk selloff and Treasury yields remain well-supported across the front of the curve as traders look through January’s noisy print to see a still-robust employment picture," says Karl Schamotta, Chief Market Strategist at Corpay.
On the one hand, the headline job report was negative for the Dollar as it suggests the Federal Reserve could consider additional rate cuts.
On the other hand, the decline in the unemployment rate and rising wages are inflationary. This can underpin expectations for limited rate cuts and provide a backstop to USD weakness.
"The Federal Reserve hit pause on interest rates at its latest monetary policy meeting, and is expected to maintain this position for as long as there is sufficient strength in the economy and labour market. While so much focus is currently placed on Trump’s potentially inflationary fiscal, trade and immigration policies, the Fed will be reassured to see a slight dip in unemployment and that, for now, the labour market is still chugging along," says Richard Carter, head of fixed interest research at Quilter Cheviot.