WIKIFX REPORT: USD slumped as Unemployment Rate Rises

The United states dollar index or it is also known as DXY was down more than 1.6 percent to the 111.10s range. That was occured when this news was written in Friday's (4/November)

New York session, and presumably continued its decline. Profit-taking is rife after the publication of a package of Americas employment data . What is the result of that publication？

It wa showed an increase in the unemployment rate that coincided with a decline in the United States' labor force participation rate. The US Bureau of Labor Statistics actually reported encouraging Nonfarm Payroll (NFP) figures. .

That NFP increased by 261k in October 2022, or more than the consensus estimate of 200k. The data for the previous period was also revised up from 263k to 315k.

US labor Market Conditions are Deteriorating

Meanwhile, average hourly earnings growth rose by 0.4 percent for month-over-Mont period. This can be seen in actual terms versus an estimate of just 0.3% made by people.

The overall report supports the Federal Reserve's move to continue raising interest rates in order to control inflationary pressures that have risen so far.

However, some of the details in the report hint that Americas labor market conditions are deteriorating rapidly. The unemployment rate of that country jumped from 3.5% to 3.7%.

In fact, market participants previously only predicted an increase in unemployment to 3.6 percent. At the same time, the participation rate actually slumped from 62.3% to 62.2%.

Further NFP data Is Still Under a Pressure

Both data indicate the next Nonfarm Payroll data is likely to be under further pressure. That is why; it seems that the Fed cannot raise interest rates as aggressively as before.

The analysts think that quasi-structural labor demand sources and components of this cycle are now slowing down. They also expect job growth to fall below 200K per month over the next few months.

That opinion was shared by Ian Shepherdson as a Chief Economist at Pantheon Macroeconomics. Besides that, a number of analysts remain bullish views against the US dollar.

RBC assesses that growth in the labor market will indeed continue to slow, but remains positive overall. They also argue the unemployment rate will climb slightly by the end of the year, making it supportive for at least one more huge sized Fed rate hike.

Labor Market Still Has Many Momentum

Despite slower job growth, there is still a lot of momentum in the labor market. It was said by Claire Fan, economist at RBC Economics, some days ago in an event.

The baseline projections assume a (Fed rate) hike of 50 basis points in December, but there is a risk that leans towards a higher rise than that. Everything seems possible to happen.

Powell said that the Fed's next meeting in December is likely to raise their interest rates by a smaller amount. However, he warned of enormous uncertainty about how high interest rates would need to be raised.

He even hinted that terminal interest rates might end higher than policymakers had previously expected. Powell's remarks were a positive catalyst for the greenback.

Dow Jones and EUR/USD slumped

However, bad news come for higher-risk assets. The Dow Jones stock index jumped about 2 percent. The rivals of the US dollar also fell.

EUR/USD slammed into the 0.9800s range, and GBP/USD was depressed in the 1.1380s. Analysts think that the statement should undermine market speculation around a “Fed rate hike” slowdown.

However, they also stressed the need to monitor the publication of upcoming economic data to gauge how big the Fed's next rate hike will be. One of the closest schedules, Nonfarm Payroll USA.

There are still a lot of flakes missing in Fed policy and the direction the dollar is moving from now on. People are going to get a pair of employment and inflation reports before they hear the next news from Federal Reserve.