By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The U.S. dollar rose on Friday after earlier selling amid a jobs report that showed higher unemployment and modest job growth overall lost momentum ahead of an inflation report next week that would trigger a rate cut. could strengthen or call into question. expectations later this month.
The dollar recovered from a three-week low against the euro, which was last down 0.3% at $1.0561. The European common currency was about to end the week 0.2% lower, posting losses in four of the past five weeks.
Against the yen, the dollar rose from session lows to trade little changed at 150 yen. The U.S. currency is set to rise 0.2% against the Japanese currency for the week, a gain in three of the past four weeks.
“Noisy (payroll) report, but soft enough to strengthen positioning adjustment across the currency,” Mark McCormick (NYSE:), head of foreign exchange and emerging markets at TD Securities, wrote in a research note.
He noted that the U.S. dollar previously followed Treasury yields lower, “reflecting the fact that the market sees enough here to expect another Fed rate cut this month.”
“ Next (LON:) This week’s CPI (consumer price index) will likely be the last piece of useful data before the Fed’s December meeting, but we think the path of least resistance remains for any US dollar weakness , which presents a great opportunity to buy the dip in early 2025,” McCormick wrote.
Market participants earlier sold off the dollar after data showed the unemployment rate rose to 4.2% after remaining at 4.1% for two months in a row.
The increase in the unemployment rate reflected the weakness in household employment. The smaller and volatile household survey that makes up the unemployment rate showed a decline of 355,000 jobs. Household employment also fell in October.
Nonfarm payrolls, on the other hand, rose by 227,000 jobs last month, after an upwardly revised increase of 36,000 in October to 12,000. Average monthly job growth over the past four reports is now just under 150,000, which is less than what many economists say is needed to provide enough work to meet a growing population.
Economists polled by Reuters had forecast payrolls would rise by 200,000 jobs last month. Estimates ranged from 155,000 to 275,000 jobs.
Bloomberg had forecasts of 225,000 jobs and some analysts cited that number to conclude that labor costs barely exceeded expectations, suggesting the Fed is unlikely to pause in its easing cycle.
CONSUMER SENTIMENT
The dollar subsequently pared losses after University of Michigan surveys for December showed consumer confidence rose more than expected, while one-year inflation expectations rose to 2.9% from 2.6 last month.
In afternoon trading, the , which measures the dollar against six major currencies, climbed 0.3% to 106 after falling to a three-week low in the previous session.
The dollar also gained against the Swiss franc, rising 0.1% to 0.8786 francs.
After payrolls, U.S. interest rate futures are pricing in an 85% chance that the Fed will cut rates by 25 basis points at its policy meeting later this month, compared with about 70% just before the data release, according to LSEG calculations.
The chance of a break, meanwhile, fell from 30% before the jobs report to 15%.
“The Fed will indeed cut by 25 basis points just to move policy from restrictive territory to neutral,” James Knightley, chief US international economist at ING, wrote in a research note.
“However, they will signal a slowdown in the pace of cuts, with a pause at the January FOMC meeting appearing likely.”
The risk to that view, he noted, is that next week’s core CPI comes in well. He said the consensus is for a 0.3% increase, but as long as that is closer to 0.25% rather than 0.349%, Knightley believes the Fed will indeed choose to cut on December 18 .
In Asia, the dollar rose against the South Korean won after local media reported that the Democratic Party, the country’s main opposition party, said lawmakers were on standby after receiving reports of a new declaration of martial law.
The won weakened, sending the dollar up 0.4% to 1,422.7.
Elsewhere, the dollar was little changed but headed for its tenth straight weekly loss amid concerns that new tariffs threatened by newly-elected US President Donald Trump will increase pressure on China’s struggling economy.
The dollar last changed hands at 7.2843 yuan in the offshore market, up 0.3%.
