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US Dollar Mixed on Disappointing Jobs Data, Stock Market Rout

March 8, 2019 at 16:23 by Andrew Moran

Many different USD notes as a backgroundThe US dollar is trading mixed against a handful of currency rivals at the end of the trading week. The buck is finding direction on a disappointing labor report, as well as a stock market rout across the globe.

In February, according to the Bureau of Labor Statistics (BLS), the US economy created only 20,000 new jobs, the smallest jobs gain since September 2017. This was much lower than the market forecast of 172,000 new jobs. The jobless rate dipped from 4% to 3.8%, supported by the return of civil servants who were furloughed because of the partial federal government shutdown in January.

Among the sectors of the economy, the largest gains were found in business and professional services (42,000) and wholesale trade (10,900). The biggest losses were situated in construction (31,000), mining (5,000), retail (6,100), and transportation (3,000). Education, leisure, and utilities were relatively flat.

Despite the poor numbers, wages continued their ascent as average hourly pay climbed 11 cents to $27.66 per hour. This brings the 12-month increase to 3.4%. With a tighter labor market, businesses are offering improved compensation packages to attract workers or retain employees.

This could provide the Federal Reserve with more ammunition to hit the pause button on winding down its $4 trillion balance sheet. Fed Chair Jerome Powell recently announced that the central bank will announce a halt to reducing the balance sheet “fairly soon,” but a Kansas City Fed Bank paper suggested that the Eccles Building was thinking about even adding to its balance sheet, which is mainly comprised of mortgage-backed securities (MBS) and Treasurys, once again.

Powell told the House Financial Services Committee:

We’ve worked out, I think, the framework of a plan that we hope to be able to announce soon, that will light the way all the way to the end of balance sheet normalization.

Ever since the Fed became dovish on monetary policy, Powell has expressed the Fed’s intentions to be data-dependent. Considering that New York Fed President John Williams believes slower economic growth is the “new normal” for the US, normalizing interest rates may not happen anytime soon – the market is already forecasting just one rate hike for 2019.

He told the Economic Club of New York:

I know this talk of slowing growth is causing uncertainty, some hand-wringing, and even fear of recession. But slower growth shouldn’t necessarily come as a surprise. Instead, it’s the ‘new normal’ we should expect.

Meanwhile, global stock markets are deep in the red to finish off the trading week, including in the US where the Dow Jones posted triple-digit losses.

The USD/CAD currency pair slumped 0.17% to 1.3435, from an opening of 1.3454, at 15:03 GMT on Friday. The EUR/USD rose 0.38% to 1.1237, from an opening of 1.1196.

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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