NEW YORK (Reuters) – The U.S. dollar rose on Friday, as earlier selling, amid a jobs report showing higher unemployment and modest job gains overall, lost momentum ahead of an inflation report next week that could either reinforce or cast doubts on interest rate cut expectations later this month.
The greenback recovered from a three-week low against the euro, which last traded down 0.3% at $1.0561. The European common currency was poised to end the week 0.2% lower, posting losses in four of the last five weeks.
Against the yen, the dollar advanced from session lows to trade little changed at 150 yen. The U.S. currency will end the week up 0.2% versus the Japanese unit, gaining in three of the last four weeks.
“Noisy (payrolls) report but soft enough to reinforce the positioning adjustment across FX,” Mark McCormick (NYSE:MKC), head of foreign exchange and emerging market strategy at TD Securities, wrote in a research note.
He noted that the U.S. dollar earlier followed Treasury yields lower, “reflecting the fact that the market sees enough here to expect another Fed cut this month.”
” Next (LON:NXT) week’s CPI (consumer prices index) will likely be the last piece of useful data for the December Fed meeting, but we think the path of least resistance remains for some U.S. dollar weakness, offering a great opportunity to buy the dip in early 2025,” McCormick wrote.
The increase in the jobless rate reflected weakness in household employment. The smaller and volatile household survey from which the unemployment rate is compiled showed a decline of 355,000 jobs. Household employment dropped in October as well.
Nonfarm payrolls, on the other hand, expanded by 227,000 jobs last month after rising an upwardly revised 36,000 in October, from 12,000. Average monthly job gains over the last four reports are now just below 150,000, short of what many economists feel is needed to provide enough work to match a growing population.
Economists polled by Reuters had forecast payrolls accelerating by 200,000 jobs last month. Estimates ranged from 155,000 to 275,000 jobs.
Bloomberg had forecasts of 225,000 jobs and some analysts cited that number to conclude that payrolls barely beat expectations, suggesting the Fed is not likely to pause in its easing cycle.
Market participants earlier sold the dollar after data showed the unemployment rate inched higher to 4.2%, after holding at 4.1% for two straight months.
CONSUMER SENTIMENT
The dollar then shed losses after the University of Michigan Surveys for December showed consumer sentiment rising more than forecast while one-year inflation expectations rose to 2.9% from 2.6 last month.
In afternoon trading, the dollar index, which measures the greenback against six major currencies, climbed 0.3% to 106, after slipping toward a three-week low in the previous session.
The greenback also gained against the Swiss franc, up 0.1% at 0.8786 franc.
Post-payrolls, U.S. rate futures priced in an 85% chance the Fed will lower interest rates by 25 basis points at its policy meeting later this month, up from about 70% just before the data’s release, according to LSEG calculations.
