The US dollar found itself on the back foot following a positive US employment report that had nevertheless not quite lived up to expectations. This was the excuse for some profit-taking by dollar longs, following some overstretched gains in the past few days; perhaps in anticipation of an even stronger report.
The euro traded as low as 1.2357 but recovered to 1.2438 following a better assessment of the report. In brief, the payrolls number came in at 214 thousand; less than the 231 expected, but the unemployment rate dropped to 5.8% from 5.9% the previous month. Positive revisions in the previous months were another plus. Wage growth was on the weak side, as average hourly wages rose by only 0.1% or 3 cents against expectations of a 0.2% increase. Most of the job growth occurred in low-wage industries such as leisure, hospitality and restaurants. The Labor Force participation rate ticked up to 62.8% from the previous month’s 62.7% low, while the U6 broad measure of underemployment fell sharply to 11.5% from 11.8%. Overall the report was a positive one, but not without some moderating points, which was exactly what caused the profit-taking.
The dollar dipped below 115 yen to 114.73 as there was also some profit-taking in stocks given their stellar run as of late.
In other news, UK trade balance for October came in slightly worse than expected, although the pound was mainly range bound throughout the session on either side of 1.5830 against the US dollar.
The highlight of Monday’s data releases will be Chinese inflation and trade balance for October.