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US Dollar Mixed As Unemployment Rate Falls to 50-Year Low

October 4, 2019 at 12:43 by Andrew Moran

A USD bill sloping downwardsThe US dollar is mixed at the end of the trading week after the US government reported that the labor market is showing some resilience as the economy – at home and abroad – cools down.

According to the Bureau of Labor Statistics (BLS), the US economy created 136,000 jobs in September, up from the 130,000 new jobs in August. The market had penciled in 145,000 new jobs. The unemployment rate fell 0.2% to 3.5%, the lowest it has been in 50 years.

Because the manufacturing sector shed 2,000 workers, much of the hiring came in the service sector. Education and health care added 40,000 jobs, the government filled 22,000 positions, and the retail industry eliminated 11,000 jobs.

The US government also reported that average hourly earnings were flat at $28.09 last month, lowering Year-on-Year gains to 2.9%. Average weekly hours were unchanged at 34.4 hours in September. The labor force participation rate stayed at 63.2%.

In other data, the US Census Bureau reported that the trade deficit widened 1.6% to $54.9 billion in August, up from $54 billion in July. Imports rose to $262.8 billion in August, up from $261.4 billion in July. Exports totaled $207.9 billion, up from $207.4 billion in the previous month.

On Thursday, the Institute for Supply Management (ISM)’s services sector index tumbled to 52.6% last month, down from 56.4% in August. Service-oriented businesses recorded their weakest September growth in three years. This comes just two days after the ISM manufacturing purchasing managers’ index (PMI) came in at lowest level in more than a decade.

Will this give the Federal Reserve the ammunition it needs to impose another quarter-point cut to interest rates later this month? The dot-plot suggests that the Federal Open Market Committee (FOMC) will cut rates one more time this year, which would come at the policy meeting in October or December.

According to the CME Group FedWatch tool, most of the market expects a 25-basis-point rate reduction, which would bring the target range down to 1.50% and 1.75%. The data also shows that a considerable portion of the money markets believe rates come plunged to as low as 1.25% and 1.50%.

The US Dollar Index rose 0.06% to 98.92, from an opening of 98.87.

The USD/CAD currency pair fell 0.23% to 1.3308, from an opening of 1.3338, at 12:36 GMT on Friday. The EUR/USD dropped 0.05% to 1.0960, from an opening of 1.0966.

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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