- US public and private sector payroll rose by 339,000 in May.
- The US unemployment rate rose from 3.4% in April to 3.7%.
- Fed officials indicated the central bank would likely forgo a rate hike this month.
Currency futures slid on Friday as the US dollar gained value due to a surge in employment numbers reported in May.
In May, public and private sector payroll rose by 339,000, exceeding the average forecast of 190,000 by economists. This increase followed a rise of 253,000 in April. However, despite the strong hiring, the unemployment rate rose from 3.4% in April to 3.7%.
Furthermore, wage growth showed signs of slowing down in the previous month. This could provide some relief to Federal Reserve officials who are working to achieve the central bank’s 2% inflation target.
Still, the employment report, which presented a combination of positive and negative indicators, further supported the notion that the economy was not on the verge of a recession. This was despite the challenges faced by the manufacturing sector and the housing market, both of which are sensitive to interest rate changes.
On Thursday, the dollar index experienced a 0.62% decline, marking its worst day in almost a month. This drop came after Federal Reserve officials indicated that the central bank would likely forgo an interest rate hike this month. The money markets currently estimate a 29% chance of a June rate hike, down from nearly 70% earlier in the week.
Philadelphia Fed President Patrick Harker stated on Thursday that it is time to pause for one meeting and evaluate the situation. The previous day, Fed Governor Philip Jefferson mentioned that skipping a rate hike would provide the committee with more data before making decisions regarding additional policy measures.
Additionally, the US Senate’s passage of a bill to suspend the debt ceiling on Thursday night removed a pillar of support for the dollar. Paradoxically, the dollar had gained from the uncertainty due to its safe-haven status.
On Friday, Fitch Ratings announced that the United States “AAA” credit rating would remain on negative watch, despite the debt limit agreement.
Elsewhere, the euro experienced a decline on Friday as the dollar rose. However, it stayed near its highest point in approximately a week, hit on Thursday. The rally on Thursday came after European Central Bank President Christine Lagarde emphasized the necessity of further policy tightening.
