Non-Farm Payroll Data Negative for the Dollar say CIBC Markets

The US Dollar weakened after the release of US employment data on Friday largely because the data betrayed a softness in wages.

The Dollar took a stumble on Friday after the Non-Farm Payroll data showed hourly earnings declining by -0.1% compared to the previous month of October.

This depressed trade in the USD despite more upbeat headline figures of 178k for hiring and the Unemployment Rate falling three basis points to 4.6% in November.

The low wage data, however, weighed disproportionately as it is more indicative of price inflation or lack of.

Dollar bulls pulled back on the throttle after the release since it changed the accepted view of the US economy embarking on a period of higher inflation which has dominated the outlook since the election of Donald Trump as President of the United States.

CIBC Economics see the figures impacting on the longer-term outlook for the Dollar.

“Given the softness in wages, today’s release should be somewhat bullish for longer-term treasuries and negative for the dollar,” they said.

The annual rate of gain for salaries was also down from a relatively strong 2.8% to 2.5%.

The slowdown in wages stopped expectations of the Federal Reserve increasing interest rates rapidly in 2017.

From two rate hikes, expectations had begun to rise of even more hikes due to the impact of Trump’s reflationary policies.

That the slower wage increase would lower the trajectory for interest rates was backed up by comments from Alex Lydall of broker Foenix Partners.

“A rate hike in December is unlikely to be derailed from the afternoon’s jobs report, but a poor wages number does give Janet Yellen food for thought,” he said, adding:

“We are still likely to see a 0.25 hike this month, but the speed of next year’s recovery could be impacted if wages and participation rates continue to cause a headache.”

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