The US dollar strengthened Friday following robust August employment figures that exceeded market forecasts, as the economy added 162,000 new positions alongside upward revisions to previous months. The stronger-than-anticipated jobs data has significantly increased trader expectations for a Federal Reserve interest rate hike at the September policy meeting, according to ING analyst James Knightley.
The employment report suggests the US labor market remains resilient despite recent concerns about economic slowdown, giving the Fed additional ammunition to maintain its hawkish monetary policy stance. Treasury yields climbed in immediate response to the data release, with rate-sensitive two-year notes leading the move higher as markets repriced rate hike probabilities.
Currency traders are now repositioning portfolios ahead of the September Federal Open Market Committee meeting, with the greenback gaining ground against major pairs including the euro and sterling. The data complicates the outlook for risk assets that had rallied on expectations of an earlier Fed pivot.
FXnCO Insight
Dollar longs remain favored into the September FOMC meeting as employment strength reduces any near-term dovish pivot expectations from the Federal Reserve.
Source: FXStreet