Earnings Surprise Sees Dollar Tick Higher

December’s report on the US labour market in December was broadly in line with expectations, with the shortfall in job creation being offset by a similar upward revision to the November number. Unemployment rose to 4.7% as expected while participation ticked higher to 62.7% from a downwardly revised 62.6%, but remained worryingly and frustratingly close to its post-financial crisis low.

Markets Have Bigger Troubles Than NFP

Low participation may be a lingering thorn in the side for the Fed but one big positive to come from the report was an increase in earnings. Average hourly earnings were up 2.9% in December from 2.5% the month before which will offer encouragement to the central bank, after having been frustrated throughout the recovery at the lack of progress here despite unemployment having fallen considerably. Should earnings continue on the current trajectory then inflationary pressures should continue to build and enable the Fed to raise interest rates three times this year as planned, even in the absence of a large fiscal stimulus package from a Trump government.


With wages rising and unemployment low though, any stimulus may force the Fed to raise interest rates even more than the three times it has indicated which would lift the dollar further and see Treasury yields continue the move higher. The jobs data has seen Gold come off its highs having capitalised on dollar weakness in recent days.

Gold Daily

For a look at all of today’s economic events, check out our economic calendar.

Economic Calendar

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

Latest posts by Craig Erlam (see all)