The U.S. dollar rose on Friday, recovering from a three-week low against the euro after a jobs report showed higher unemployment and modest job gains overall. The greenback advanced from session lows to trade little changed at 150 yen against the Japanese currency. The dollar gained 0.2% versus the Japanese unit, posting gains in three of the last four weeks.
The jobs report showed a decline of 355,000 jobs in the household survey, while nonfarm payrolls expanded by 227,000 jobs last month. Economists polled by Reuters had forecast payrolls accelerating by 200,000 jobs last month. The increase in the jobless rate reflected weakness in household employment.
After the report, the University of Michigan Surveys showed consumer sentiment rising more than forecast, while one-year inflation expectations rose to 2.9% from 2.6 last month. The dollar gained against the Swiss franc, up 0.1% at 0.8786 franc.
Post-payrolls, U.S. rate futures priced in an 85% chance the Fed will lower interest rates by 25 basis points at its policy meeting later this month, up from about 70% just before the data’s release. The odds of a pause dropped to 15% from 30% ahead of the jobs report.
Market participants will be looking to next week’s consumer prices index (CPI) for further guidance on interest rate cut expectations. The CPI will likely be the last piece of useful data for the December Fed meeting, according to Mark McCormick, head of foreign exchange and emerging market strategy at TD Securities.
The risk to the view of another rate cut is next week’s core CPI print coming in hot, according to James Knightley, chief international economist, U.S., at ING. He said the consensus is for a 0.3% rise, but so long as that is closer to 0.25% rather than 0.349%, Knightley believes the Fed will indeed opt to cut on Dec. 18.
