NEW YORK (Reuters) – The U.S. Federal Reserve may be forced to raise interest rates next month after data showed job growth in the world’s biggest economy last month The dollar rose Friday.
Ahead of the jobs report, interest rate futures markets were betting the Fed would pause at its May policy meeting. The market is currently pricing in a 70% chance that the Federal Reserve will raise interest rates by 25 basis points (bps), but also multiple rate cuts by the end of the year.
US nonfarm payrolls rose by 236,000 in March, matching forecasts of 239,000, according to Friday’s data. February data has been revised higher to show he added 326,000 jobs instead of the previously reported 311,000.
The unemployment rate fell to 3.5% from 3.6% in February. Average hourly earnings, which reflect wage inflation, rose 0.3% in March after rising 0.2% in February.
“The Federal Reserve is likely to continue sending the high-strength message ahead of its May policy meeting, raising hopes of an eventual rate hike,” said Carl Schamotta, chief market strategist. I would support it and put a floor on the dollar.” at Kopey in Toronto.
“However, recent data suggests a more negative economic risk backdrop. If inflation and retail sales fall short of expectations in the coming weeks, all bets are off.
Liquidity faded in the hours following the release of hiring numbers ahead of Easter weekend. Some European markets will also be closed on Monday.
In afternoon trading, the Dollar Index gained 0.1% to 102.03. Against the yen, the dollar rose 0.3% to ¥132.10 and the euro fell 0.1% to $1.0910.
The US dollar gained 0.2% against the Swiss franc to 0.9049 francs. The pound similarly fell against the dollar, dropping 0.2% to $1.2412.
Analysts also said jobs data showed strong gains, but some sectors, especially manufacturing and construction, saw moderate declines.
“(This) is an encouraging sign for the Fed that the effects of monetary policy are beginning to take hold,” Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis, said in an emailed statement. It should,’ he said.
With non-farm payrolls down, investors are now eyeing the US Consumer Price Index (CPI) for March. Economists polled by Reuters expect a core CPI of 0.4% last month and 5.6% year-on-year.
Jefferies U.S. economist Tom Simmons writes that he expects the CPI to “continue to show uncomfortably high core inflation pressures.”
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Currency bid price at 12:20 PM (1620 GMT)
Reported by Gertrude Chavez-Dreyfuss. Additional reporting by Saqib Iqbal Ahmed.Editing: Mark Porter, Kirsten Donovan
Our criteria: Thomson Reuters Trust Principles.
