FX.co ★ Spike In Hiring And Consumer Sentiment Lift Dollar

During the week ending December 6, the U.S. Dollar experienced slight gains, fueled by unexpectedly strong payroll numbers and improved consumer sentiment. The dollar appreciated against currencies such as the euro, Japanese yen, Canadian dollar, Swedish krona, and Australian dollar. However, it weakened against the British pound and Swiss franc.

The Dollar Index—a key gauge of the dollar's strength against a mix of currencies including the euro, British pound, Japanese yen, Canadian dollar, Swedish krona, and Swiss franc—rose by 0.30%, closing at 106.06 on December 6, up from 105.74 the previous week. The trading range was notably broad, reaching a peak of 106.73 on Monday and a low of 105.42 on Friday.

Early in the week, reports indicated a higher-than-expected manufacturing PMI, job openings, and a lower-than-expected services PMI, which affected the Dollar Index, bringing it to 105.71 on Thursday—just shy of the previous Friday's 105.74. The dollar's strength predominantly stemmed from U.S. Bureau of Labor Statistics job data and preliminary consumer sentiment figures from the University of Michigan released at the week's end.

On Friday, data showed a significant rise in non-farm payrolls, increasing to 227,000 in November from just 36,000 the previous month, surpassing the anticipated 200,000. The unemployment rate inched up to 4.2% from 4.1%, in line with expectations, while average hourly earnings remained steady. The labor force participation rate, expected to rise to 62.7%, unexpectedly fell to 62.5%.

The rise in the unemployment rate, though anticipated, sustained hopes for an interest rate cut, limiting the dollar's gains. According to the CME FedWatch tool, the likelihood of a quarter-point rate cut by the Federal Reserve in December rose to 86% on Friday, compared to 62% on Monday.

The University of Michigan reported that U.S. consumer sentiment increased for a fifth consecutive month to 74 in December, up from 71.8 in November, exceeding forecasts of 73.

Throughout the week ending December 6, the U.S. dollar posted a 0.07% increase against the euro amid political turmoil in France and Germany and strong rate cut expectations from the European Central Bank. The EUR/USD pair fell from 1.0575 on November 29 to 1.0568 by December 6, trading between a low of 1.0460 on Monday and a high of 1.0631 on Friday. The pound edged up by 0.04% against the dollar during the same week. This movement accompanied mixed U.S. jobs data, declining PMI readings in the U.K., and anticipated rate cuts from the Bank of England. The GBP/USD pair climbed to 1.2742 on December 6, from 1.2737 the previous week, trading between $1.2616 on Monday and $1.2813 on Friday.

The Australian dollar saw a notable decline, falling 1.86% against the U.S. dollar during the week. Updates on Australia's GDP showed the economy grew by 0.3% quarter-on-quarter in Q3 2024, short of market expectations of 0.4%, leading to rate cut expectations from the Reserve Bank of Australia. The AUD/USD pair dropped from 0.6510 on November 29 to a four-month low of 0.6389 by week's end, touching a high of 0.6527 on Monday and a low of 0.6372 on Friday.

The USD/JPY pair increased by 0.19% during the week, closing at 150.03, up from 149.75 the week before. The pair fluctuated between a low of 148.64 on Tuesday and a high of 151.24 on Wednesday, as the currency markets considered political unrest in South Korea, the dollar's strength, and the possibility of a rate hike by the Bank of Japan.

Looking ahead, U.S. consumer price inflation data is set for release on Wednesday. Before this data is unveiled, the Dollar Index has slightly decreased to 106.02 from Friday's 106.06. The ECB is anticipated to reduce rates by 25 basis points at its meeting on Thursday. In anticipation, the EUR/USD pair is hovering around 1.0579, up from 1.0568 on Friday. The GBP/USD pair has risen to 1.2778 from 1.2742. Ahead of the Reserve Bank of Australia's interest rate decision, the AUD/USD pair has rebounded to 0.6461 from 0.6389. The USD/JPY pair has climbed to 150.86, despite better-than-expected GDP updates from Japan over the weekend, up from 150.03 on Friday.