Dollar Rebounds After Strong Jobs Report

US added 200,000 positions in January

The US dollar rose against major pairs on Friday. The release of the U.S. non farm payrolls (NFP) proved to be the much needed shot in the arm after the greenback was under pressure for most of 2018. The job gains were above expectations but more importantly the hourly wages came in higher, giving the Fed a potential green light to hike 3 or 4 times in 2018. The market is estimating a 77.5 percent probability of the first rate lift to come in March.

• The Reserve Bank of Australia (RBA) will publish its rate statement on February 5
• the Reserve Bank of New Zealand (RBNZ) will follow on February 7
• The Bank of England (BoE) will host a super Thursday on February 8

USD surged after wages rose more than expected

The EUR/USD gained 0.22 percent in the last five days. The single currency is trading at 1.2424. The USD was having a week to forget but a jobs week is not done until the U.S. non farm payrolls (NFP) report is released. The gain of 200,000 jobs in January was the boost the dollar needed after the Fed and the ADP did now sway the market. The USD reversed most of the losses of the week, gaining 0.43 percent against the EUR. The biggest boost came from the hourly wages growth at 0.3 percent for an annualized gain of 2.9 percent.

The disappointing December jobs report played a part as investors were estimating 180,000 positions and instead got pleasantly surprised by both strong gains and positive inflation signals. The move in the USD could be under threat next week as there are few economic released of note in the US and the political drama in Washington has not been beneficial to the greenback.

Fundamentals indicators and monetary policy has been supportive of the USD, but political uncertainty has hurt the dollar’s status as a reserve currency. The upgraded growth expectations around the world have also shrunk the gap between the US and the rest of the world.

The GBP/USD lost 0.31 percent during the trading week. The currency pair is trading at 1.4120 ahead of the Bank of England (BoE) monetary policy meeting on Thursday, February 8 at 7:00 am EST. The central bank is not expected to change its benchmark rate but it could signal a hike sooner rather than later specially as expectations of a softer Brexit and economic growth has been encouraging. The BoE made its first rate rise in a decade back in November. The data released on Super Thursday, so called because of the sheer number of announcements, will guide the market and shape the monetary policy expectations going further into 2018.

The USD/CAD gained o.86 percent during the week. The currency pair is trading at 1.2421. The USD appreciated against the loonie and put the Canadian currency at weekly lows. The greenback rose 1.22 versus the CAD on Friday after the release of the U.S. non farm payrolls (NFP). The U.S. Federal Reserve meeting and positive employment numbers earlier in the week did little for the USD, but with the release of the biggest indicator it all turned.

The economic data releases form Canada will start with on Tuesday, February 6 at 8:30 EST with publication of the trade balance. Later that same day the Ivey Purchasing Managers Index will be posted at 10:00 am EST. Employment data will be the highlight of the week on Friday, February 9 at 8:30 am with a 2,000 job loss report expected after the back to back gains of 70,000 positions in the previous months.

Market events to watch this week:

Monday, February 5
4:30am GBP Services PMI
10:00am USD ISM Non-Manufacturing PMI
7:30pm AUD Retail Sales m/m
7:30pm AUD Trade Balance
10:30pm AUD Cash Rate
10:30pm AUD RBA Rate Statement
Tuesday, February 6
8:30am CAD Trade Balance
4:45pm NZD Employment Change q/q
NZD Unemployment Rate
Wednesday, February 7
10:30am USD Crude Oil Inventories
3:00pm NZD Official Cash Rate
3:00pm NZD RBNZ Monetary Policy Statement
3:00pm RBNZ Rate Statement
4:00pm NZD RBNZ Press Conference
Thursday, February 8
4:00am AUD RBA Gov Lowe Speaks
7:00am GBP BOE Inflation Report
7:00am GBP MPC Official Bank Rate Votes
7:00am GBP Monetary Policy Summary
7:00am GBP Official Bank Rate
7:30pm AUD RBA Monetary Policy Statement
Friday, February 9
4:30am GBP Manufacturing Production m/m
8:30am CAD Employment Change
8:30am CAD Unemployment Rate

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

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