- The US economy has gained 224K positions in June, much better than expected.
- Despite a minor miss in wages, the Federal Reserve has reasons to be cheerful.
- The greenback may extend its gains as the odds of an easing cycle diminishes.
Fluctuations in job gains are common – and as Powell said – the average gains remain healthy and point to a robust economy. The increase of 224,000 positions has put speculation of a downturn in job hiring to an end.
Wages have risen by only 0.2% in June – below 0.3% that was expected – but on top of an upwards revision from 0.2% to 0.3% for May. The annual pay rise is 3.1% in June, the same as in May.
The US labor market is on fire and Federal Reserve officials can sit back and enjoy the fireworks. While the central bank is set to cut interest rates at the end of the month, the upbeat Non-Farm Payrolls diminish the chances of a deep cut of 50 basis points that investors have wished for.
Fed Chair Jerome Powell and his colleagues may even consider abandoning plans to cut interest rates – but will find it hard to retreat from their promises. The central bank does not like to shock markets.
Zooming out to the longer term, the chances of a full cycle of monetary easing are also in doubt. The world's most powerful central bank has two mandates: full employment and price stability. As long as average employment remains robust, it is hard to see the Fed embarking on a long series of rate cuts.
Inflation, the Fed's second mandate, will be tested next week. The Consumer Price Index (CPI) report for June will be closely eyed by traders.
Nevertheless, assuming CPI is OK, the Fed is unlikely to race to the bottom – something the ECB is keen on.
On this background, the US dollar has room to rise beyond the immediate reaction, especially against the vulnerable euro.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
USD/JPY flat-lines below 151.50 after soft Japanese CPI data
USD/JPY stays defensive below 151.50 after the release of a soft Japan's CPI report and mixed Industrial Production and Retail Sales data on Friday. Japanese verbal intervention also weighs on the pair amid the holiday-thinned conditions on Good Friday. US PCE inflation awaited.
AUD/USD buyers lack vigor above 0.6500 amid Good Friday trading lull
AUD/USD is trading listlessly above 0.6500 in the Asian session amid light trading on Good Friday. The Aussie pair shrugs off encouraging comments from China's FX regulator, as price action remains subdued ahead of the US PCE inflation data.
Gold flirts with record highs above $2,230, all eyes on US PCE data
Gold price flirts with record highs around $2,230 during the Asian session on Friday. The uptick of yellow metal is bolstered by the safe-haven flows amidst growing economic concerns and the prospect of interest rate cuts from the US Federal Reserve.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days. As this coiling up comes undone, investors can expect XRP to kickstart a massive rally.
Will they won’t they cut rates is the question of Q2?
There has been some significant push back from Fed and Bank of England members around the timing of rate cuts, and the Bank of Japan still haven’t physically intervened in the FX market to stem yen weakness although they are threatening to do so.