Earnings shine in another strong US jobs report

Dollar rallies after impressive numbers

The dollar has caught a bid after the release of yet another strong jobs report for the US, which included some good news on wages as well as employment.

Earnings growth has long eluded the US recovery and has remained in the mid-2% range for much of the last year. This has led to speculation that the labour market may not be as tight as we thought, especially when you consider how strong job creation still is, but today’s data finally offered some good news on that front. Earnings grew by 2.9% in August, the highest increase since 2009 and potentially a sign that a tight labour market is starting to be seen in people’s pay.

Of course this could be a one-off jump in the data, as we’ve seen in the past, but it does offer further support to the view that the US economy is very strong. Combined with another NFP reading above 200,000 and unemployment being below at 3.9% and things are looking very positive. The one potential downside for Trump may be that the Federal Reserve may be looking at this and wondering what impact a sustained improvement could have on their tightening policy, something the US President has been openly critical of in recent months.

The report was enough to pull cable away from 1.30, where it had been threatening to break above, while the euro was also softer against the dollar having struggled around 1.1650. US Treasury yields are also creeping higher again after the report with the 10-year back above 2.9% and potentially eyeing another run at 3%, which has proven challenging due to its role as a safe haven during uncertain and concerning times.

GBPUSD Daily Chart

EURUSD Daily Chart

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US 10-Year Treasuries Daily Chart

Source – Thomson Reuters Eikon

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.