US non-farm payrolls smashed expectations on Friday. 200,000 jobs were created in January, higher than the 180,000 forecasts, whilst December’s figure was also revised higher to 160,000. Unemployment, as expected remained at historically low levels of 4.1%.
However, the seriously dollar boosting figure came from average earnings growth. Average earnings increased to 2.9% on an annualised basis, higher than the 2.6% expected and above the upwardly revised 2.7% from December. Month on month average earnings increased a higher than forecast 0.3%, whilst last months figure was upgraded to an impressive 0.4%.
Concerns over low wage growth and lowflation had been plaguing the Fed for much of the previous year. In the case of some Fed officials, these concerns were weighing on the prospects of further rate rises in 2018. However, today’s forecast beating numbers will go some way to easing fears at the Fed over stagnant earnings growth and inflation going forwards.
After today's data, an interest rate rise in March is as good as in the bag. It was being priced in the Fed funds at 90% prior to today’s figures. It would take more than a shocking month of economic data to prevent the Fed from making the first hike of the year in March.
USD/JPY up almost 1%
Following NFP release the dollar jumped 0.4% versus a basket of currencies, shooting through 89.00 towards resistance in the region of 89.20/25.
USD/JPY, often the most closely watched pair on an NFP release, shot up almost 1% braking above 110 and pushing up to the near-term resistance of 110.35. A meaningful push through this level will see an approach towards 110.8. On the downside immediate support can be find around 109.7.
As the negative sentiment towards the dollar has declined, so has the EUR/USD. The pair dropped 0.5% back towards $1.2450, after trading as high as $1.2518 earlier in the session. Should the dollar continue to gain strength moving towards the weekend, $1.24 could be the next target for the EUR/USD bears.
GBP/USD supported at $1.4150
GBP/USD has dumped over 115 points following improved demand for the dollar and weakening interest in sterling. Softer than forecast UK construction data put the pound on a downward trajectory, which was then amplified by the impressive NFP numbers, which have boosted hopes of further action by the Fed. The pound has found support at $1.4150, traders will now look towards the BoE Super Thursday next week.
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