Non-Farm Payrolls Report Firms Expectations Of Only Two Rate Hikes in 2017
The release of Non-Farm Payrolls (NFPs) elicited little reaction from the Dollar on Friday.
GBP/USD traded at 1.2496 after the release, only marginally lower than the 1.2500 before and well within the day's trading range; EUR/USD continued to trade in the 1.0760s.
Although the data from the US Bureau of Labour Statistics showed the number of jobs added to the economy increased by a higher-than-expected 227k in January, the Dollar remained more or less unchanged.
The Dollar Index, calculated from taking its trade-weighted average against a basket of currencies was trading unchanged for the day at 99.88 at the time of writing.
Part of the reason for the lack of upside may have been to do with the lower-than-forecast 0.1% rise in Average Hourly Earnings, which was below the 0.3% expected.
Earnings are a strong indicator of inflation and the lower print questioned assumptions that the Presidents new reflationary economic agenda would push up prices.
Other data in the jobs report showed the Unemployment Rate increase to 4.8% from 4.7% previously, when no-change had been expected.
However, a rise in the participation rate, which is the number of people actively seeking work to 62.9 from 62.7 previously, would partly explain the rise in the number of overall jobless.
“The January jobs report was a mixed bag with continued solid employment growth, weaker-than-expected wage growth and a higher unemployment rate. We continue to expect two 25bp rate hikes in 2017 and risks to this forecast seem more balanced now,” said Nordea Bank’s Johnny Bo Jackobsen.
Lloyds Bank redoubled their call for the June rate rise as a result of the report.
“Overall while this report is further evidence that the labour market is buoyant the continued slow pace of wage growth means that the Fed will feel under no great pressure to step up the pace of monetary tightening.
“A March interest rate rise still cannot be ruled out. Nevertheless, this release seems consistent with our view that the Fed will wait until June before hiking rates again,” commented Lloyds Commercial Banking.
Given the market was already pricing in two rather than three rate hikes in 2017, it is not surprising the report failed to move the Dollar as it was in line with market expectations.
