- The dollar dropped to a six-week low due to disappointing job creation data.
- There was an increase in the US unemployment rate to 3.9% last month.
- The US services sector slowed for a second consecutive month in October.
On Friday, currency futures rallied as the dollar dropped to a six-week low due to disappointing job creation data. The jobs report reinforced expectations that the Federal Reserve would likely keep interest rates stable at its December meeting. The greenback was down 1.4% for the week, marking its worst weekly performance since July.
US employment data (Bureau of Labor Statistics)
The data revealed that nonfarm payrolls only increased by 150,000 jobs last month, with revisions for September showing a decrease to 297,000 jobs created from the previously reported 336,000 jobs.
Ronald Temple from Lazard in New York stated, “From my perspective, the Fed’s rate hike cycle is over.” US job growth slowed in October, partly due to strikes by the United Auto Workers (UAW) union against Detroit’s “Big Three” car makers, negatively impacting manufacturing payrolls. Additionally, the increase in annual wages was the smallest in nearly 2-1/2 years, indicating a declining labor market.
The employment report on Friday also indicated an increase in the unemployment rate to 3.9% last month, the highest level since January 2022.
Following the job and services sector data, market expectations for a rate increase in December decreased to less than 5%, compared to nearly 20% late on Thursday, according to the CME’s FedWatch tool.
The dollar dipped to a two-week low against the yen of 149.18 and ended at 149.315 yen, marking its most significant weekly loss since late July.
The yen’s decline earlier in the week came after the Bank of Japan adjusted its yield curve control policy, though not as extensively as markets had anticipated. Kazuo Ueda, the central bank’s governor, plans to continue dismantling the ultra-loose monetary policy. Moreover, he aims to exit the decade-long accommodative regime next year.
Meanwhile, the pound rose 1.5% against the dollar, reaching a six-week high of $1.2389. It marked the British pound’s best daily performance since January.
In addition, the US services sector slowed for a second consecutive month in October. The Institute for Supply Management disclosed a drop in its non-manufacturing PMI to a five-month low of 51.8, down from 53.6 in September. This report further weakened the dollar.