The US dollar surged after the publication of the October labour market report published by the Bureau of Labor Statistics (BLS). The report proved significantly stronger than expected, reinforcing assumptions about a possible rate increase by the Federal Reserve (the Fed).
Results of the BLS report for October
Non‑farm payrolls rose by 165,000 in October, while analysts had forecast an increase of around 65,000. Revisions to the August and September data added a further 84,000 jobs to previous estimates.
The unemployment rate fell in October from 4.2% to 4.1%. The largest job gains were in professional and business services (+70,000), health care (+42,000), transportation and warehousing (+25,000); manufacturing employment increased by 19,000.
Wage growth and inflationary signals
Average hourly earnings rose by 0.4% in October month‑on‑month versus the expected 0.3%, and increased 3.1% year‑on‑year compared with the forecast 2.9%. Faster wage growth can support consumer demand and put upward pressure on inflation.
Last week the Federal Reserve left the policy rate in the 3.75−4.00% range. A labour market stronger than expected has raised market expectations for a possible rate hike in December.
Market reaction: FX rates and yields
After the report was released, the dollar index, which tracks the currency against a basket of six major currencies, rose by about 0.7%. The euro weakened by nearly 0.8% according to market data.
Yields on US Treasuries also rose: two‑year notes added around 5 basis points to 4.52%, while ten‑year yields climbed roughly 4 points to 4.88%. Higher yields made US government bonds relatively more attractive to investors.
