- The US has gained 263,000 jobs in November, better than expected.
- Moderation in job growth points to a soft landing for the economy.
- The end of the Fed's rate hike cycle looks closer, supporting renewed selling pressure on the Dollar.
Every trend has a countertrend – and low expectations ahead of the Nonfarm Payrolls have contributed to the reaction. The Dollar is responding positively to the relatively upbeat data. The US gained 263,000 in November, better than 200,000 but below 284,000 in October, according to the revised data.
Nevertheless, it is insufficient to trigger a big rate hike from the Federal Reserve – nor change the Greenback's downtrend trajectory.
Despite the positive figure, Nonfarm Payrolls have been trending down, and have now reached the 200,000 area, the levels seen before the pandemic. This kind of job growth is Goldilocks, not too hot, nor too cold. It is slow enough to keep the Fed at a 50 bps hike in December while refraining from being too depressing to hit stocks and trigger safe-haven flows.
A bounce in the Dollar was much needed after Fed Chair Jerome Powell's dovish remarks on Wednesday. He signaled a slowdown to a 50 bps hike and more importantly, changed his tone. Powell stressed he does not want to crash the economy and wanted to refrain from overtightening. That is a different tune to the inflation-fighting spirits seen in recent months.
The report justifies this direction.
What could change the Dollar's next moves? The Consumer Price Index report on December 13. The publication triggers the wildest market moves, and can be a game changer if it shows that inflation has reared its ugly head once again.
Until then, it's stocks up, Dollar down and this opportunity to correct to the other side will likely prove short-lived.
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