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Peter Davis

An writer at FOMOdrive

  • Jul 07, 2023
  • 2 min read

The US dollar fell amid weak data on NonFarm Payrolls

100 US dollar bills

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 public sector also provided a huge boost in employment.

The dollar index, which had reached new highs in mid-June, continued its decline from the previous day.

On Friday, the US Bureau of Labor Statistics reported that US non-farm payrolls increased by 209,000 in June, which was lower than the expected figure of 225,000. Additionally, the data from the previous month was revised downwards by 33,000.

In June, the unemployment rate dropped 0.1% to 3.6%, which was in line with predictions. Although the average wages growth data was better than anticipated, it was not enough to bolster the dollar.

The average hourly wage last month rose by 0.4% compared to the previous month, surpassing the predicted +0.3% m/m. The growth of average wages in annual terms was even higher than expected, at +4.4%, instead of the anticipated decline to 4.2% y/y. Furthermore, last month's data was revised upwards.

In June, the average working week rose to 34.4 hours, up from 34.3 hours in the previous month of May.

In June, the private non-agricultural sector saw an increase of 149 thousand jobs, which was lower than the forecast of 200 thousand. On the other hand, the public sector saw a growth of 60 thousand jobs, significantly higher than the expected number.

Commerzbank reported that the US labor market did not meet the high expectations set for it, as evidenced by the June jobs report. Although job growth decreased to 209,000, other aspects of the report were more positive than in May.

The bank suggests that, despite the cooling of the labor market, it is still likely to be too strong from the Fed's perspective. As a result, the Fed is expected to increase rates again this month.

Bloomberg has noted that the larger-than-anticipated increase in average wages serves as a reminder that the labor market has not yet cooled off completely, which could keep the Fed in a hawkish stance, thus putting pressure on risky assets.

The likelihood of a 25bp rate increase at the Federal Reserve's meeting on July 25-26 has increased to 92.4%, up from 91.8% the day before and 86.8% seven days prior.

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