The dollar advanced Friday morning after the May jobs report surprised with better-than-expected figures and the unemployment rate matched a record low. Earlier, the pound was able to inch higher on a stronger-than-expected manufacturing PMI. Meanwhile, Trump’s imposition of steel and aluminum tariffs on U.S. allies garnered criticism from leaders around the world.
Payrolls rise and jobless rate matches record low
The U.S. labor report for May gave the dollar a boost Friday morning. The currency spent most of Thursday slowly recovering from Wednesday’s losses off of better-than-expected PCE numbers, but the nonfarm payroll numbers are helping the greenback gain against the euro and the Japanese yen.
Nonfarm payrolls increased by 223,000 jobs in May, compared to 188,000 expected. April numbers were revised down to 159,000 from 1640,000. Although the numbers are highly volatile and prone to revisions in the coming months, the May numbers are much higher than expected.
Average hourly earnings met expectations of increasing 2.7% year over year. And the unemployment rate dropped from 3.9% to 3.8%, matching April 2000, which is the lowest since 1969.
The numbers weren’t as much of a surprise for those following President Trump on Twitter. He propelled speculation that the numbers would be pretty good when he tweeted this morning that he was “looking forward to seeing the employment numbers.” The better-than-expected jobs data gives more likelihood to an interest rate hike by the Federal Reserve during its June 12-13 FOMC meeting.
EUR/USD pair dipped from 1.171 to 1.165 on the news, but is trading up around 1.167 after 9 a.m. EST.
The dollar is gaining the most against the Japanese yen, jumping from 109.1 to 109.7.
The dollar was only briefly able to gain on the pound. Cable traded around 1.331, only slightly lower than before the release.
Pound powers through upbeat NFP
The pound didn’t give way to the better-than-expected nonfarm payroll numbers from the U.S., holding on to most of the gains it made earlier Friday.
GBP/USD rose from 1.326 to 1.332 after Markit manufacturing PMI data for May came out stronger than expected. The index of business conditions in the manufacturing sector showed 54.4, compared to 53.5 expected.
Sterling is also getting a lift on reports that the U.K. is considering giving Northern Ireland joint U.K.-E.U. status.
Euro-area politics cool down
The bond markets in Spain and Italy are recovering Friday after forward progress was made with the uncertain future of both country’s governments.
The populist coalition of the League and Five Star Movement parties will take power today after they comprised on a new finance minister at the behest of President Sergio Mattarella. The parties originally proposed euroskeptic Paolo Savona as finance minister, prompting worry from investors across the globe about an exit from the common currency. Mattarella rejected Savona for the position.
Economist Giovanni Tria will be finance minister now. Law professor Giuseppe Conte will be prime minister with the League’s Matteo Salvini and Five Star’s Luigi Di Maio serving as deputy premiers.
In Spain, Prime Minister Mariano Rajoy lost a confidence vote and it looks like socialist Pedro Sanchez has the backing to take power.
The improved market mood helped the EUR/USD reach 1.171 Friday morning before dropping to 1.166 on the strong U.S. jobs data.
Trump’s tariffs aren’t winning him any friends
The Trump administration’s Thursday announcement to move forward with imposing steel and aluminum tariffs on some of the United States’ closet allies drew criticism from around the globe overnight.
Canadian Prime Minster Justin Trudeau called the tariffs “unacceptable” and said he sees no sign of common sense in the action.
Mexico, Europe and Japan also spoke out condemning the tariffs. The E.U. said it would bring a case against the U.S. to the World Trade Organization.