Slower Job Creation and Wage Growth in the U.S. Weaken the USD

Dec. 7, 2018 (Western Union Business Solutions)  – The dollar slid in knee jerk fashion after U.S. hiring proved less than expected which gave traction to concerns of a moderating economy. America netted 155,000 jobs in November, below forecasts of 200,000. Unemployment and wage growth steadied at 3.7% and 3.1%, respectively. While job growth fell short of forecasts, the gain of more than 150,000 is still consistent with the labor market firing on most cylinders. The dollar looks set for more choppy trade as markets seek answers to whether the U.S. economy is stronger or weaker than it thinks.




The yen steadied after an overnight surge to one than one-month peaks. Sliding U.S. Treasury yields have diminished the dollar’s allure, easing pressure on lower yielding rivals like the yen. The Japanese currency is also benefiting from persistent trade war fears as risk averse shift toward traditional safe harbors. The yen should takes its cues today from Wall Street whose rebound after the U.S. jobs report should limit demand for safer bets.



The euro hovered toward the top of a confined range against the greenback ahead of America’s monthly jobs report. Reports that the Fed may adopt a slower, wait-and-see attitude toward interest rates next year weighed on the dollar to the benefit of rival currencies such as the euro. Still, the euro so far has lacked the momentum to push meaningfully higher amid mounting evidence of a slowing euro zone economy. Data today from Germany showed a surprise contraction in industrial orders in October. The ECB, which holds its final meeting of the year next week (Thu, Dec 13), could set the euro in motion. The bank is expected to announce the end of its QE stimulus at year-end. Any dovish tone that plays up economic headwinds would leave the euro vulnerable.



Canada’s dollar soared above 1 ½ year lows after a blockbuster jobs report kept the door ajar for the Bank of Canada to raise borrowing rates. Canada netted a massive 94,100 jobs in November, a robust amount that knocked unemployment two ticks lower to 5.6%, the lowest since 1976. The quality of the report was strong as most of the hiring came from the more meaningful full time jobs. The bullish jobs report bodes better for the BOC to raise borrowing rates during the first quarter of 2019 given its data dependent stance. While stronger, the loonie isn’t out of the woods and could see a meaningful swing if OPEC announces a cut in oil production. A forceful move that shores up sagging oil markets would risk a stronger recovery in the Canadian dollar.

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