A strong Payrolls can become the Foundation for the dollar
The US labor market once again showed its strength, adding more than 300 thousand jobs (Nonfarm Payrolls) in January versus the forecast at 165 thousand, the market Reaction was somewhat blurred due to the unemployment rate and wage growth. However, in our opinion, the report is much more evidence of strong growth in the economy.
The unemployment rate has grown in January to 4% in comparison with the November lows by 3.7%. This is due to the increase in the share of the economically active population: more and more people want to find work, encouraged by the continuing growth of the labour market. In this context, the increase in the share of the economically active population together with the increase of employment level (over 200 million) – a clear Testament to the strength of the economy.
The growth rate of wages had not lasted up to expectations, but there’s reason for caution. The annual rate reach impressive 3.2%. Only due to the revised increase in December, the January data looks some weakening. Themselves – is one of the highest rate of growth since 2009.
Separately the power of positive momentum, the United States confirmed the publication of the manufacturing ISM. Instead of the expected drop to 54.1 (signal dilation), we saw growth from 54.3 to 56.6, despite the failure of the component prices.
Additional added positive growth in construction spending (+0.8%) and weaker-than-expected growth stocks in wholesale warehouses. These are all signs of healthy demand in the United States at the end of last year.
Why does it matter for the dollar?
The U.S. currency regained more than 70% of the failure after the fed’s comments last week. A strong GDP recovery.
The US economy is slowing down, not as sharply as feared. This means that the cautious rhetoric of the fed may become more optimistic in the coming weeks or months. Return on rate hike in the agenda is able to return the dollar to rise.