The US Dollar seems to have made very slight gains against the Euro at the end of the week, making up for a small part of the losses incurred in recent days. The EUR/USD main currency pair seems to have retreated from 1.1480 to 1.1430 after the NFP publication.
As reported by the U.S. Bureau of Labor Statistics, total nonfarm payroll employment increased by 467,000 in January, compared with an average monthly gain of 555,000 in 2021. Nonfarm employment has increased by 19.1 million since April 2020 but is down by 2.9 million, or 1.9 percent, from its pre-pandemic level in February 2020. In January, employment growth continued in leisure and hospitality, in professional and business services, in retail trade, and in transportation and warehousing. Thus, the government data seems to be much better than ADP's release of private-sector employment change, which showed a decline of 301,000 jobs.
In January, average hourly earnings for all nonfarm private employment rose 23 cents to $31.63. Over the past 12 months, average hourly earnings have risen 5.7 percent, a result that appears to be the best since June 2020, showing that as inflation rises, so do Americans' earnings. Thus, a price-wage spiral is not out of the question here, which the Federal Reserve will want to break by possibly raising interest rates.
As indicated by the Fed's interest rate futures pricing, the market seems to be expecting more than five rate hikes in 2022. It appears that the market may be giving more and more chances for a 50 basis point hike in March. Just a month ago, the chances of such a move by the Fed were around 2 percent, currently it is 15 percent, and the decision is still a month and a half away.
The employment data do not seem to have made much of an impression on the US stock market, nor do the chances of higher rate hikes. S&P 500 futures are down 0.3 percent at 4464 points, while Nasdaq 100 futures are down 0.28 percent at 14450 points.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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