The US dollar collapsed after the release of data on the labor market

On Friday, data on the labor market was released, causing the dollar to drop.

ADP's data showed a much lower number of new jobs than what was predicted, falling short of expectations.

The data released on the unemployment rate and the growth of average wages was better than anticipated.

The dollar index dropped below 102 points, despite having hit a month-long high of 102.8 the day before.

On Friday, the US Bureau of Labor Statistics reported that US non-farm payrolls increased by 187,000 in July, which was lower than the expected 200,000. Additionally, the data from the previous month was revised downward by 24,000.

In July, the unemployment rate unexpectedly dropped by 0.1%, settling at 3.5%. Despite this, the average wages data, a key indicator of inflation, was better than anticipated, yet it still failed to bolster the dollar.

Last month, the average hourly wage rose by 0.4%, surpassing the predicted +0.3% month-over-month. This was higher than the expected annual growth of 4.2%, with the actual growth being +4.4%.

In June, the private non-agricultural sector saw an increase of 172 thousand jobs, which was 7 thousand lower than expected. Meanwhile, the public sector saw an increase of 15,000 jobs.

The employment rate in the economy rose by 268 thousand, while the number of unemployed decreased by 116 thousand, resulting in a decrease in the unemployment rate despite the labor force remaining largely unchanged.

Private education and medical services saw the greatest rise in jobs, with an increase of 100 thousand, while trade saw an increase of more than 26 thousand. Additionally, the industry created 18 thousand new jobs.

The Association of Mortgage Bankers of the United States notes that although employment growth is slowing and wage growth is still strong, both are still above the rate that would be consistent with the Federal Reserve's inflation target. Despite this, the Federal Open Market Committee is likely to maintain the current rate due to the decrease in inflation.

The forecast for EUR/USD has been slightly altered by Commerzbank, and they now anticipate the pair to reach 1.14 by the end of the year.

The FxPro analyst team notes that, despite the wage growth rates and employment rates, a decrease in inflation is only possible if commodity prices fall. Unfortunately, the 20% increase in oil prices over the past 6 weeks makes this scenario unlikely. Therefore, the markets should be prepared for the possibility that the Fed is not finished with tightening policy.