U.S. economy creates 216,000 jobs in December
U.S. wage growth rises as well
Fed funds futures reduce rate cut bets in March
U.S. dollar on pace for best weekly rise since July 2023
(Adds analyst comments, byline, details, fed funds futures, other currencies, updates prices)
The dollar was little changed on Friday in choppy trading, coming off a three-week peak, after data showed the world's largest economy created more jobs than expected last month, suggesting the Federal Reserve would likely be in no rush to cut interest rates over the next few months.
The dollar index hit 103.10, its highest since mid-December, and was last flat at 102.4 =USD . On the week however, the dollar gained 1.05%, on pace for its best weekly rise since last July.
Data showed the U.S. economy generated 216,000 new jobs in December, exceeding the consensus forecast of 170,000. The unemployment rate was steady from November at 3.7%, compared with expectations of a rise to 3.8%, while average earnings rose 0.4% on a monthly basis, against forecasts of a 0.3% gain.
"It's obviously a strong report. The market (has) sniffed out a strong jobs report over the past couple of days, so maybe the reaction isn't as strong as it could have been," said Adam Button, chief currency analyst at ForexLive in Toronto.
"In terms of the data itself, the revisions take a bit of the shine off the headline number. It is more of a mixed bag than it looks at first blush."
U.S. rate futures have priced in about five rate cuts of 25 basis points each for 2024, with the year-end fed funds rate expected at 4% compared with the current level of 5.25%, according to LSEG's rate probability app. Early this week, the market had factored in six rate declines.
Post-data, rate futures traders have pared back easing bets at the March meeting to around 59%, from about 68% to 70% over the last week.
"We stand by our stance that calls for a first U.S. rate cut in March are premature, and that the Fed will need to see more evidence of a cooling in the jobs market, particularly in wages, to have confidence in achieving its medium-term inflation objective," wrote Matthew Ryan, head of market strategy at global financial services firm Ebury, in a note after the jobs report.
In other currencies, the dollar climbed 0.3% against the yen to 145.21 JPY=EBS . It rose as high as 145.98 yen, a three-week peak. On the week, the greenback advanced 2.8%, on track for its best weekly performance since May 2022.
The euro, on the other hand, was flat on the day at $1.0947 EUR=EBS . Europe's common currency fell 0.9% on the week, its largest weekly drop since early December and snapping a run of three weeks of increases.
Inflation across the 20-nation bloc jumped to 2.9% in December from 2.4% in November, just shy of expectations for a 3.0% reading.
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