The US dollar climbed against a basket of world currencies on Friday after mixed employment data sparked a new debate about the pace and timing of the Federal Reserve’s next rate hike.
The dollar index, which measures the performance of the greenback against a six peers, was up 0.1% at 96.49.
The dollar advanced against the British pound, with the GBP/USD falling 0.6% or 86 pips to 1.5167. The pair has dropped more than 1.5% on the week and is testing the immediate support at 1.5168. A clean break below this level exposes 1.5117. On the upside, initial resistance is seen at 1.5309.
After regaining 120.00 this week, the USD/JPY plunged 0.9% to 118.98 on Friday. Immediate support is now located at 118.50. On the upside, resistance is likely found at 120.64.
In economic data, US employment growth slowed significantly in August, while the unemployment rate fell to a new seven-year low, providing fuel to both sides of the monetary policy debate.
Employers added a modest 173,000 jobs last month, well below forecasts calling for 220,000, the Labor Department reported on Friday. The July hiring rate was revised up to 245,000.
The unemployment rate ticked down to 5.1% from 5.3% as labour force participation remained at 62.6%.
Average hourly earnings ticked up 0.3% in August after rising 0.2% the prior month. Most of the Federal Reserve’s 12 districts identified growing wage pressures in the central bank’s latest Beige Book, which was released on Monday. Higher wage growth is generally associated with higher consumer spending and overall economic growth.
Economists are split as to whether the Federal Reserve will begin raising interest rates this month. Forty-eight percent of the 54 economists polled by Bloomberg News recently see a September rate increase, down from 77% just two weeks earlier.
US stock markets plunged on Friday, with all three major averages falling into the red. The Dow Jones Industrial Average declined more than 200 points or 1.5% in midday trade. The S&P 500 was down nearly 30 points or 1.5%. The tech-heavy Nasdaq Composite fell nearly 50 points or 1%.
Stock market volatility remained near recession levels on Friday, according to the Chicago Board Options Exchange (CBOE) Volatility Index. The VIX surged more than 8% to 27.80, marking the tenth consecutive session it was above the ten-year average of around 20.
Commodities were down across the board on Friday, with oil futures declining more than 1.2%. Gold was also down more than $6 to $1,118.30 US per troy ounce.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.