By Karen Brettell
NEW YORK (Reuters) -The dollar jumped to a seven-week high on Friday and was on track for its best week since September 2022, after a surprisingly strong jobs report for September led traders to lower their bets that the Federal Reserve will still will make another 50%. -basis point interest rate cuts.
The dollar was also poised for its best weekly percentage performance against the Japanese yen since 2009, as traders adjusted to less easing from the Fed and more easing from the Bank of Japan, leading to a rapid repricing of the currency pair .
U.S. nonfarm payrolls rose by 254,000 jobs last month, better than the 140,000 new jobs expected by economists polled by Reuters.
The unemployment rate also fell unexpectedly, from 4.2% in August to 4.1%.
It is a ‘blockbuster payroll report’ in every respect. “I think a no-landing scenario for the U.S. economy has suddenly become much more plausible,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
“The expectation now would be that the Federal Reserve will be much more cautious in easing policy,” Schamotta said.
Improving economic data and more hawkish comments from Fed Chairman Jerome Powell on Monday, as he pushed back against expectations of continued deep rate cuts, prompted traders to trim their bets on a 50 basis point cut at the Fed’s next meeting on June 6. November. -7.
Those chances were completely wiped out after Friday’s data. Traders are now pricing in no chance of a 50 basis point rate cut, down from about 31% earlier on Friday and 53% a week ago, CME Group’s (NASDAQ:) FedWatch Tool shows. A 25 basis point cut is seen as almost certain, with traders also seeing a small chance that the Fed will leave rates unchanged.
Bank of America expects the Fed to cut rates by 25 basis points per meeting through March 2025, followed by cuts of 25 basis points per quarter through the end of 2025, BofA U.S. economist Aditya Bhave said in a report on Friday.
“The data flow since the Fed’s decision to cut by 50 basis points in September has been remarkably positive,” he said, calling Friday’s report “A-plus.”
Chicago Fed President Austan Goolsbee called the numbers “fantastic” and said more labor market data along these lines would boost his confidence that the economy is at full employment with low inflation.
The index reached 102.69, its highest level since August 16, and was on track for its best weekly percentage gain since September 2022.
The euro fell to $1.09515, the lowest level since August 15.
The dollar rose to 149.02 yen, the highest level since August 16.
Japan’s new Prime Minister Shigeru Ishiba stunned markets this week when he said the economy was not ready for further rate hikes, a sharp reversal from his earlier support for the Bank of Japan’s expiring decades of extreme monetary stimulus.
The dollar also got a boost this week from safe-haven demand amid concerns about rising conflict in the Middle East.
Supreme Leader Ayatollah Ali Khamenei said Friday that Iran and its regional allies will not relent. Iran upped the ante when it fired missiles into Israel on Tuesday, partly in retaliation for Israel’s assassination of Hezbollah Secretary General Sayyed Hassan Nasrallah.
Sterling fell to $1.3070, its lowest level since September 12.
Huw Pill, chief economist at the Bank of England, said on Friday that Britain’s central bank should only gradually cut interest rates, a day after the pound fell 1% after Governor Andrew Bailey said the BoE could move more aggressively towards lower interest rates to go.
In cryptocurrencies, bitcoin rose 1.95% to $61,958.
