Fundamental Analysis

Currency Futures Mixed as Dollar Surges on Jobs Gain

  • US employers increased employment by 253,000 in April.
  • Canada reported stronger-than-expected domestic employment numbers.
  • The pound rose to near a one-year high against the dollar on Friday ahead of the BOE meeting.

Currency futures ended Friday mixed as the dollar rose after an upbeat jobs report. The dollar lost some of its gains made earlier versus the Euro but maintained its strength against the yen. April’s employment gains and wage growth exceeded economists’ expectations but revealed negative job revisions for March.

US jobs data (Source: Bureau of Labor Statistics)
US jobs data (Source: Bureau of Labor Statistics)

The employment figures rose by 253,000, exceeding economists’ predictions of 180,000 new positions. Compared to predictions for a 4.2% increase, the US average hourly wage increased at an annual rate of 4.4%.

However, data for March was also lowered, with 165,000 jobs added rather than the previously reported 236,000.

The dollar has declined since reaching a 20-year high in September as investors prepare for the possibility that the Fed is at or near the conclusion of its tightening cycle. However, peers like the European Central Bank have become more hawkish.

Investors have already factored in the possibility that the Fed may lower interest rates in the second half of this year. Even though the economy is slowing down, some strong areas remain, so investors are holding off on becoming too bearish on the US dollar for now.

On Wednesday, as expected, the Fed hiked rates by 25 basis points. It, however, removed language indicating that it “anticipates” the need for more rate hikes.

Elsewhere, investors lowered their expectations that the Bank of Canada will lower interest rates in the upcoming months. This was in response to stronger-than-expected domestic employment numbers. It helped the Canadian dollar soar to a two-week high against the American dollar on Friday.

In April, the Canadian economy added 41,400 new jobs, far above forecasts for a 20,000-job rise, while the unemployment rate remained close to a record low.

The pound rose to near a one-year high against the dollar on Friday as investors awaited the Bank of England’s rate decision. The Bank of England appears likely to increase interest rates on May 11 to 4.5 percent. 

Despite recent rate increases, inflation has decreased less quickly than the BoE had hoped, falling to 10.1% in March from 10.4% in February. This remains significantly higher than the 9.2% rate the BoE had predicted in early February.