Dollar Continues Correction After US Nonfarm Payrolls Release
The US dollar extended its weakness in recent trading despite solid US employment indicators. Labor Department data showed net job creation of 115,000 in April, slowing from March's upwardly revised 185,000, but well above the WSJ consensus of 55,000.
However, the composition of the data prompted a more balanced market response. The unemployment rate remained at 4.3%, as expected, while wage growth came in slightly below forecasts, alleviating concerns that labor-related inflationary pressures would re-emerge.
In the forex market, the WSJ Dollar Index fell 0.3%. The dollar weakened 0.5% against the euro and 0.2% against the yen, while the ICE DXY gauge fell 0.2%. These movements suggest that a "positive surprise" in payrolls was not enough to restore support for the dollar if the market judges wage pressures to not reinforce the narrative of higher interest rates for longer.
Going forward, market participants are likely to assess the combination of job creation rates, unemployment stability, and wage dynamics as determining the direction of the Fed's policy expectations.
The next variables to monitor are whether the slowing hiring trend continues, and whether wages strengthen again—as both will influence the path of inflation and the dollar's volatility against major currencies.
Source: Newsmaker.id
