Mixed Forecast for Latest US Dollar (USD) Currency Exchange Rate Outlook

February 8, 2016 - Written by Ben Hughes

STORY LINK Mixed Forecast for Latest US Dollar (USD) Currency Exchange Rate Outlook

US Jobs Data Prompts US Dollar (USD) Exchange Rate Volatility - Unemployment Falls, Average Earnings Climb

In economics, transmission mechanisms are considered highly important. The headline jobs figures in the US may have revealed stellar levels of job creation over the past two years, with over 200,000 new positions created most months; last Friday’s US labour market numbers built on this theme, showing the lowest overall level of joblessness in the US for eight years. The impact of the lower-than-expected reading was softened as November's job creation figures were revised upwards by almost the same extent as December's were revised down, meaning that 30,000 jobs were simply 'shuffled around', rather than 'lost'. However, the impression, up to this point, amongst US economic participants, has been that this apparent improvement in the headline jobs data has not translated itself into improved living standards for the average American.

USD to British Pound (GBP), Euro (EUR) Exchange Rates Gains Following NFP Report

For this reason, the Average Earnings element of last Friday’s US labour market data was considered of particular significance, revealing as it did a month-on-month increase of 0.5% in take home pay for US workers. The attendant year-on-year increase of 2.5% in average earnings over the preceding 12 months suggested that US workers are now beginning to really feel the benefit of the improvement in the local jobs market and the US Dollar (currency : USD) registered respectable gains against the other major global currencies as a consequence of the data.

How Many Times will the Federal Reserve Raise Interest Rates in 2016?

However, better living stands or not, Friday’s labour market statistics mean that the US Federal Reserve is now highly unlikely to countenance another increase in its benchmark interest rate any time soon, according to leading analysts. Rob Carnell of ING Bank feels that a March rise in US interest rates now very unlikely, a sentiment echoed by many other economists; as last week’s session drew to a close, he commentated that,

‘with global financial conditions tightening, this release says "more data needed" before drawing any firm conclusions about any shift in Fed policy. That does at least suggest that a March hike remains off the table. And hopefully by then, we will have a better idea of whether things are really slowing, with no further hikes possible, or whether recent data were just a soft patch and the Fed can resume tightening later in the year.’

The short-to-medium outlook for the Buck therefore remains decidedly mixed.

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TAGS: Daily Currency Updates Dollar Pound Forecasts