All things considered I think this is a very good labour market report and will only feed into expectations for a rate hike from the Federal Reserve in June. The rally in the dollar immediately after the release clearly supports this view as it drove the EURUSD pair down to 1.0880 and there could be more to come with September 2003 lows around 1.08 offering further support below here.
I do believe that hourly earnings may be a minor issue given that the Fed is determined to see this improve in order to drive inflationary pressures this year but with the unemployment rate now at the upper end of the range that is deemed full employment, it’s surely only a matter of time until we start to see some significant wage growth.
I think the June meeting may just come a little soon and with wage growth not quite taking off yet, I still believe that the Fed will wait until September to act. They are clearly in no rush to make this decision and with inflation below target, they don’t need to.
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