Earnings Surprise Sees Dollar Tick Higher
|December's report on the US labour market in December was broadly in line with expectations, with the shortfall in job creation being offset by a similar upward revision to the November number. Unemployment rose to 4.7% as expected while participation ticked higher to 62.7% from a downwardly revised 62.6%, but remained worryingly and frustratingly close to its post-financial crisis low.
Low participation may be a lingering thorn in the side for the Fed but one big positive to come from the report was an increase in earnings. Average hourly earnings were up 2.9% in December from 2.5% the month before which will offer encouragement to the central bank, after having been frustrated throughout the recovery at the lack of progress here despite unemployment having fallen considerably. Should earnings continue on the current trajectory then inflationary pressures should continue to build and enable the Fed to raise interest rates three times this year as planned, even in the absence of a large fiscal stimulus package from a Trump government.
With wages rising and unemployment low though, any stimulus may force the Fed to raise interest rates even more than the three times it has indicated which would lift the dollar further and see Treasury yields continue the move higher. The jobs data has seen Gold come off its highs having capitalised on dollar weakness in recent days.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.