Fundamental Analysis

Rising US Job Numbers Propel Dollar, Weaken Currency Futures

  • There was an addition of 199,000 jobs in the US economy.
  • Traders adjusted their Fed rate cut bets, favoring a start in May.
  • The yen marked its fourth consecutive weekly gain against the dollar.

On Friday, the US dollar strengthened as new data revealed increased US job growth, pushing currency futures down. Moreover, there was a drop in the unemployment rate for November, indicating robustness in the labor market. 

US employment change (Source: Bureau of Labor Statistics)

US employment change (Source: Bureau of Labor Statistics)

The Labor Department’s Bureau of Labor Statistics reported an addition of 199,000 jobs, surpassing economists’ expectations of 180,000 jobs.

The employment report showed a decrease in the unemployment rate to 3.7%. It contradicted market expectations of a Fed rate cut in early 2024. Traders adjusted their bets on short-term US interest-rate futures, shifting from a March rate cut to a more likely start in May.

The decline in the unemployment rate, dropping from October’s nearly two-year high of 3.9%, eased concerns about the economy teetering toward a recession. 

Despite this, there’s a noticeable slowdown in the labor market. September saw an addition of 35,000 fewer jobs than initially estimated. November’s employment growth fell below the average monthly increase of 240,000 observed in the past year. Nevertheless, payroll gains remain comfortably above the threshold of 100,000 jobs per month needed to match the growth in the working-age population. 

Stephen Miran, co-founder of Amberwave Partners, commented on the overly dovish sentiment in the US rates market, emphasizing that the Fed’s intervention may not be necessary given the significant easing of financial conditions since November.

The yen initially declined after the US jobs data release. However, it had surged by 1.2% earlier and marked its fourth consecutive weekly gain against the dollar. This surge followed Bank of Japan (BOJ) Governor Kazuo Ueda’s comments that the central bank is contemplating ending its negative rates policy.

Although the yen experienced a notable rally on Thursday, its momentum may be limited without further support from the BOJ.

Elsewhere, the Australian dollar declined despite Thursday’s data, revealing China’s first export increase in six months in November. China’s customs data showed a 0.5% growth in exports compared to the 6.4% fall in October, beating the expected 1.1% drop. Meanwhile, imports contracted by 0.6%, missing predictions of a 3.3% increase and reversing a 3.0% gain from last month.