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USD: dollar drops but nonfarm payrolls spike

By Ricky Bean May 8th, 2017

The US dollar hit its lowest level in approximately six months against both the euro and pound after data showing the US jobs growth rebounded sharply. The unemployment figures were not enough to shake investor bullishness towards the euro and sterling.

US nonfarm payrolls surged by 211,000 jobs last month the labour department said, beating expectations of economists polled by Reuters, who were expecting a gain of around 185,000. This means that the unemployment level currently stands at 4.4% – the lowest level since May 2007. However, the payrolls were revised further downward for March’s number by another 19,000, taking the number down to 79,000.

Earlier in the week the Federal Reserve did as expected and kept interest rates on hold. In their statement, they dismissed the very weak growth in the first quarter (Q1) as ‘likely to be transitory’, signalling that they remain on course for another rate hike in June. The market is now pricing in a probability of 94% that the rate hike will be 0.25% in June 2017, against a 67% probability prior to the Fed meeting.

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