Traders seem undecided on whether to throw the USD a lifeline, following the news that the United States added another impressive 222,000 jobs to its economy in the month of June.
While the solid headline jobs number continues to highlight the underlying strength of the US jobs market, average hourly earnings on a monthly basis underwhelmed at 0.2%. The slower wage growth represents a slight disappointment, and explains why we are not seeing a mad rush from traders to purchase the Dollar. With a lack of wage increase fueling concerns that this period of low inflation in the US is more than “transitory”, we might see the financial markets continue to debate over how often the Federal Reserve can continue to raise US interest rates.
This data does provide room for the Federal Reserve to push ahead with higher interest rates, however not at the rate expected by the financial markets. I would also add that the lower rate of wage growth and ongoing inflation expectations will lead to more conflicting messages from the Federal Reserve regarding the pace of future interest rate increases.
All in all, this NFP report will be summed up as a mixed bag; while it does support the message that US interest rates may increase again, it doesn’t change the pace of expected rate rises and this will consequently be the major risk factor for the Greenback.