U.S. dollar jumps on jobs data, signs of rising wages

The U.S. dollar surged after July’s nonfarm payrolls report showed the economy was adding 528,000 more jobs, well above economists’ consensus estimate of 250,000. Additionally, the unemployment rate fell to 3.5% from 3.6% and matches the pre-pandemic low.

The good jobs data pushed back the idea that the economy is in a recession, but it reinforces the idea that it is overheating and will need more rate hikes to calm it down. The probability of a 75 basis point hike at the September Fed meeting rose to 67% from 40% at the release.

Bond yields jumped 2s up 17bps to 3.21% while 10-year bonds rose 12bps to 2.80%.

It’s a perfect storm for the US Dollar as it soared across the board. USD/JPY rose to 134.40 from 133.17 before the release. This erases this week’s declines and pushes the pair up the August range.

The Euro fell to 1.0176 from 1.0230 and the Cable to 1.2082 from 1.2145.

Adding to the case for the strong dollar was strong wage data. The average hourly wage increased by 0.5% over the month against 0.3% expected.

The Canadian jobs data was released at the same time and disappointed at -30.6K vs +20.0K expected. USD/CAD moved from 1.2885 to 1.2928.

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