USD: Dollar pares gains after weak US jobs data

The US Dollar (USD) pared gains against the euro on Friday after data showed U.S. job growth slowed sharply in October amid disruptions from hurricanes and strikes by aerospace factory workers.

Nonfarm payrolls increased by 12,000 jobs last month, after a downwardly revised 223,000 in September, the Labor Department’s Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast October payrolls rising 113,000.

The U.S. unemployment rate, however, held steady at 4.1%, offering assurance that the labor market remained on a solid footing.

Hurricane Helene devastated the Southeast in late September and Hurricane Milton lashed Florida a week later. A total 41,400 new workers were on strike, including machinists at

Boeing and Textron, an aircraft company, when employers were surveyed for October’s employment report.

“The headline figure has been expected for quite some time to be low, though perhaps not this low, but it looks like right now traders are treating the entire data dump this morning with a grain of salt,” Helen Given, associate director of trading at Monex USA, said.
The euro was down 0.12% against the dollar at $1.087, after having dipped as much as 0.28% earlier in the session.

The dollar index, which tracks the greenback against six major currencies, was up 0.07% at 103.95.

“Under normal circumstances this would be a hugely damaging report for the dollar and 50 bp rate cuts would suddenly be thrown back into the discussion. But markets are rightly avoiding an overreaction,” Ballinger Group FX market analyst Kyle Chapman said in a note.

Traders of futures that settle to the Fed’s policy rate were pricing about a 99% chance of a quarter-point interest rate cut on Nov. 7, to 4.5%-4.75%.

The Labor Department’s closely watched employment report was the last major economic data before Americans head to the polls on Tuesday to choose Democratic Vice President Kamala Harris or Republican former President Donald Trump as the country’s next president.

Opinion polls show the race is very tight. The Fed announces its policy decision two days after the election.

“I’m sure trading will be choppy, but likely range-bound ahead of both the election and the FOMC,” Monex’s Given said.

The dollar was on pace to snap a three-session losing streak against the yen, rising 0.26% to 152.41, ahead of a three-day weekend in Japan.
Less dovish comments from Bank of Japan Governor Kazuo Ueda following the central bank’s decision to stand pat on Thursday had lifted the yen earlier this week.

“We think the chances of a Dec. rate hike have somewhat increased after Gov. Ueda’s press conference,” Morgan Stanley MUFG economists Takeshi Yamaguchi and Masayuki Inui wrote in a report on Thursday.

Their base case remains for the BOJ to raise rates again in January to 0.5%.

Sterling was up 0.55% at $1.29695 on Friday, and set to snap a five-week streak of weekly losses against the dollar. Short-term British government borrowing costs headed for their biggest weekly jump in over a year on Friday, as Labour’s tax-and-spend budget raised inflation expectations.

In cryptocurrencies, bitcoin, the world’s largest cryptocurrency by market cap, was up 1.5% on the day at $71.089.