Dollar Improves as U.S Unemployment Rate Steadies
The United States dollar improved modestly against its major trading partners on Friday, apart from the Canadian dollar as the month of May 2022 employment report shows no change.
The national May employment bulletin showed that the unemployment rate remained unchanged at 3.6%, compared with the 3.5% rate expected. The labour force expanded by 330,000, and the labour force participation rate slightly rebounded but remained below its pre-COVID level.
The lack of movement in the unemployment rate is encouraging, but it is uncertain if this would continue, Jefferies said in a research note, adding that at the current job growth rate, the remaining labour market slack — estimated to be around 1.4 million — will be fully absorbed by September.
“There will be virtually no one left to hire” at that point, Jefferies economists said, adding that either employment growth has to slow down significantly from now on or wage pressures will continue to intensify.
Meanwhile, nonfarm payrolls grew by 390,000, above the 325,000 jobs increase expected in a survey compiled by Bloomberg. Private payrolls rose by 333,000, above expectations and following a 405,000 gain in April.
A quick summary of foreign exchange activity heading into Friday shows that USD-JPY rose to 130.1246 from 129.8839 at the Thursday US close and 129.7277 at the same point Thursday morning. The Japanese services PMI was revised up in May, putting it further ahead of the April reading, data released overnight showed.
The Bank of Japan is expected to maintain its ultra-low interest rate regime to boost growth further. USD-CAD fell to 1.2572 from 1.2574 at the Thursday US close and 1.2647 at the same point.
Canadian productivity data was released. The Bank of Canada raised interest rates by 50 basis points at its meeting on Wednesday, as expected, and promised further action to fight inflation.
BOC Deputy Governor Paul Beaudry said Thursday that he could see the case for pushing rates beyond the neutral range of 2%-3% to fight inflation. EUR-USD ticked down to 1.0739 from 1.0748 at the Thursday US close but was up from 1.0690 at the same point Thursday morning.
EU services PMI declined in May, though it remained well above the breakeven point. There were similar declines in Spain, Germany, Italy, and France.
Other data released earlier Friday showed that Eurozone retail sales declined in April. The European Central Bank meets on June 10 and is expected to use the meeting to pave the way for its first rate increase of the cycle at the July 22 meeting.
GBP-USD slipped to 1.2569 from 1.2577 at the Thursday US close but remained above the 1.2552 reading at the same point Thursday morning. READ: Interbank Rates Fall as Financial System Liquidity Improves
UK markets remain closed on Friday for the Queen’s Jubilee and there are no data scheduled for release. A further rate increase is expected at the Bank of England’s next monetary policy meeting on June 16. # Dollar Improves as U.S Unemployment Rate Steadies
