The dollar index (DXY00) Friday rose by +0.44% and posted a 2-year high. Friday’s stronger-than-expected US Dec payroll report pushed bond yields higher and boosted the dollar as unexpected signs of strength in the labor market reduced the chances of Fed rate cuts. The dollar added to its gains after Friday’s University of Michigan US Jan inflation expectations indicator unexpectedly accelerated. The dollar also has carryover support from hawkish comments Thursday from Fed Governor Bowman and Fed President Collins and Schmid, who expressed their support for the Fed’s pause in its rate-cutting cycle. Friday’s slump in stocks has also increased liquidity demand for the dollar.
US Dec nonfarm payrolls rose +256,000, stronger than expectations of +165,000 and the largest increase in 9 months. Also, the Dec unemployment rate unexpectedly fell -0.1 to 4.1%, showing a stronger labor market than expectations of no change at 4.2%.
