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US Dollar Rises on Strong Jobs Report, Capped by ‘Patient’ Fed

January 30, 2019 at 18:21 by Andrew Moran

One dollar note with a pyramidThe US dollar is gaining against its currency rivals midweek after new data shows the labor market entered 2019 on a strong note. But the dollar’s ascent was capped by a “patient” Federal Reserve, suggesting that there will not be any moves on interest rates until at least June.

According to ADP, US companies added 213,000 jobs in January, beating median estimates of 174,000. The labor gains were found in all business sizes and industries. Large companies filled 66,000 new jobs, mid-size businesses added 84,000 jobs, and small businesses created 63,000 jobs. White-collar positions surged by 46,000 jobs and blue-collar work soared by 68,000 jobs.

Experts typically use the ADP numbers to gauge how many new jobs the federal government’s employment report will show. The Bureau of Labor Statistics (BLS) is scheduled to publish January’s jobs numbers on Friday, and the early forecasts are pegging 174,000 new jobs with the unemployment rate unchanged at 3.9%.

The US central bank completed its two-day Federal Open Market Committee (FOMC) meeting on Wednesday to establish monetary policy for the next six weeks. The Fed is not expected to raise interest rates, and the CME Group FedWatch tool does not see any rate hikes until at least June, though the market is still penciling in two hikes.

Why is the market anticipating a more dovish Eccles Building? One word: patient.

While Fed Chair Jerome Powell is upbeat about the overall outlook of the US economy, he will rely on the data to move forward with any moves to rates.

This could be good news for the national economy after the Congressional Budget Office (CBO) projected that the 35-day partial government shutdown lost the country $11 billion in growth — $3 billion in the fourth quarter of 2018 and another $8 billion in the first quarter of 2019. This could prevent the US from achieving 3% gross domestic product (GDP) growth in the January-to-March period.

Wall Street Journal survey says output will grow at just 1.8% in Q1.

The USD/CAD currency pair tumbled 0.51% to 1.3201, from an opening of 1.3270, at 16:58 GMT on Wednesday. The EUR/USD fell 0.11% to 1.1421, from an opening of 1.1435.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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