US dollar briefly spikes as payrolls beat forecasts

Philip McHugh December 5th 2022 - 2 minute read

The US dollar spiked on Friday as the latest non-farm payrolls report came in hotter than expected. However, the ‘greenback’ was unable to hold its gains.

The pound has retreated this morning, with GBP/EUR slipping to €1.1631 and GBP/USD weaker at $1.2282. GBP/CAD and GBP/AUD are also down at CA$1.6482 and AU$1.8033 respectively, while GBP/NZD is flat at NZ$1.9173.

Looking ahead to this afternoon, the latest US ISM non-manufacturing PMI is in focus. Could a slowdown in America’s services sector drive USD even lower?

What’s been happening?

The US dollar jumped higher on Friday, after the non-farm payrolls figure smashed forecasts and wage growth unexpectedly rose. The strong jobs data briefly lifted expectations of a more hawkish Federal Reserve.

However, after a week of downbeat data and dovish Fed comments, the ‘greenback’ quickly relinquished its gains. It now seems like a smaller interest rate rise from the US central bank is inevitable.

Meanwhile, the pound wavered higher amid renewed hopes of a resolution to the Northern Ireland Protocol dispute. Irish Foreign Minister Simon Coveney said a ‘landing zone’ is possible within the next few weeks.

As for the euro, a decline in German exports and a slump in Eurozone producer prices put some pressure on the common currency.

What’s coming up?

Turning to today’s session, the main focus is the US ISM non-manufacturing PMI. Economists expect it to show a slowdown in service sector activity in America, which could push the US dollar even lower.

Before then we have the Eurozone retail sales report for October. A forecast slump in sales could weigh on EUR, with markets expecting the data to print at -1.7%.

As for the pound, the UK’s final services PMI is the only significant data release this week. Therefore, GBP investors may turn to domestic headlines for fresh impetus.

Any more positive news about the Northern Ireland Protocol may lift Sterling. However, worries about the UK’s bleak economic outlook, intensifying industrial action or the cost-of-living crisis could dent the pound.

Written by
Philip McHugh

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