Dollar rebounds after January jobs number

The U.S. dollar rose against major pairs on Friday. The release of the U.S. nonfarm payrolls (NFP) proved to be the much needed shot in the arm after the greenback was under pressure for most of 2018. The job gains were above expectations but more importantly, the hourly wages came in higher, giving the Fed a potential green light to hike 3 or 4 times in 2018. The market is estimating a 77.5% probability of the first rate lift to come in March.

  • The Reserve Bank of Australia (RBA) will publish its rate statement on February 5
  • the Reserve Bank of New Zealand (RBNZ) will follow on February 7
  • The Bank of England (BoE) will host a super Thursday on February 8

USD surged after wages rose more than expected

The euro/U.S. dollar (EUR/USD) currency pair gained 0.22% in the last five days. The single currency is trading at 1.2424. The U.S. dollar was having a week to forget but a jobs week is not done until the U.S. nonfarm payrolls (NFP) report is released. The gain of 200,000 jobs in January was the boost the dollar needed after the Fed and the ADP did now sway the market. The USD reversed most of the losses of the week, gaining 0.43% against the euro. The biggest boost came from the hourly wages growth at 0.3% for an annualized gain of 2.9%.

The disappointing December jobs report played a part as investors were estimating 180,000 positions and instead got pleasantly surprised by both strong gains and positive inflation signals. The move in the USD could be under threat next week as there are few economic released of note in the US and the political drama in Washington has not been beneficial to the greenback.

Fundamentals indicators and monetary policy has been supportive of the dollar, but political uncertainty has hurt the dollar’s status as a reserve currency. The upgraded growth expectations around the world have also shrunk the gap between the United States and the rest of the world.

The GBP/USD lost 0.31% during the trading week. The currency pair is trading at 1.4120 ahead of the Bank of England (BoE) monetary policy meeting on Thursday, February 8 at 7:00 am EST. The central bank is not expected to change its benchmark rate but it could signal a hike sooner rather than later especially as expectations of a softer Brexit and economic growth has been encouraging. The BoE made its first rate rise in a decade back in November. The data released on Super Thursday, so called because of the sheer number of announcements, will guide the market and shape the monetary policy expectations going further into 2018.

The U.S. dollar/Canadian dollar (USD/CAD) currency pair gained 0.86% during the week. The currency pair is trading at 1.2421. The USD appreciated against the loonie and put the Canadian currency at weekly lows. The greenback rose 1.22 versus the CAD on Friday after the release of the U.S. nonfarm payrolls (NFP). The U.S. Federal Reserve meeting and positive employment numbers earlier in the week did little for the USD, but with the release of the biggest indicator, it all turned.

The economic data releases form Canada will start with on Tuesday, February 6 at 8:30 EST with publication of the trade balance. Later that same day the Ivey Purchasing Managers Index will be posted at 10:00 am EST. Employment data will be the highlight of the week on Friday, February 9 at 8:30 am with a 2,000 job loss report expected after the back to back gains of 70,000 positions in the previous months.

Canadian dollar weekly graph January 29, 2018

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