Dollar Near 18-Month High Despite Retreat to 102.11
Key Facts
The U.S. dollar held near an 18-month high against the euro on Monday, November 9, after posting its biggest daily gain in nearly six months in Friday’s session, according to a Reuters report. The dollar index fell 0.1% to 102.11 points in Monday trading, after rising about 0.7% in the previous session. The move followed a U.S. jobs report that showed stronger-than-expected growth in October. The report brought the possibility of tighter monetary policy back into focus, after rate-hike bets had declined as technology stocks fell. In currency markets, the euro rose 0.2% to $1.1159, and the pound gained 0.2% to $1.3381.
The U.S. economy added 165,000 nonfarm jobs in October, exceeding the 65,000 estimate of economists polled by Reuters, while the unemployment rate fell to 4.1%. Details from the Bureau of Labor Statistics showed that professional and business services recorded the largest sectoral increase, adding 70,000 jobs. Employment rose by 42,000 in health care and 25,000 in transportation and warehousing, while manufacturing added 19,000 jobs. These increases show the sources of hiring that supported the monthly total, as the overall gain more than doubled estimates. Average hourly earnings for private-sector employees also rose 0.4% during the month, to $38.00.
On an annual basis, average hourly earnings rose 3.1% in the 12 months ended in October. In revisions to prior months, the Bureau of Labor Statistics raised its estimate for August jobs to 186,000 from 133,000, and its estimate for September to 60,000 from 29,000. The two-month total was therefore 84,000 jobs higher than previously estimated. These revisions added to October’s positive surprise, showing that job growth in the two prior months was stronger than initially reported. In the bond market, the 10-year Treasury yield rose 1.6 basis points to 4.85% on Friday, while the two-year yield gained 4.1 basis points to 4.52%.
Rate bets shifted after the report; expectations of a hike at the December meeting rose to about 80% after falling to roughly 67% on Thursday, according to Reuters, citing the CME FedWatch tool. In trading on November 9, futures showed a nearly 81% probability of a rate hike at the December 9 meeting, compared with 71% a week earlier. Bets on tighter policy had declined before the report as technology stocks fell and investors worried about the outlook, profitability and regulation of artificial intelligence investments. Strong jobs data then supported a return of rate-hike expectations, although the dollar index posted a slight decline in Monday’s session. New York Federal Reserve President John Williams said U.S. growth had remained resilient and that inflation was “too high and should be brought back to 2%.”
Federal Reserve officials’ comments formed part of the backdrop to debate over continued tightening; San Francisco Federal Reserve President Mary Daly said the central bank may need to keep raising rates despite the painful decline in technology stocks. Meanwhile, the jobs data focused on employment and wage growth, indicators that accompanied the return of rate-hike bets in the market. The next U.S. inflation reading is a near-term event for investors, with the October consumer price index scheduled for release on November 10 at 08:30 a.m. Eastern time. The Federal Reserve scheduled its Federal Open Market Committee meeting for December 8 and 9, with the press conference to be held on December 9. The U.S. November jobs report was also scheduled for December 4 at 8:30 a.m. Eastern time.