Nonfarm payrolls surged by 165,000, far outpacing the 65,000 additions anticipated by economists and bringing the unemployment rate down to 4.1%. In response, market odds for a December interest rate hike of at least 25 basis points climbed from roughly 67% to nearly 80%. The resulting rally in the dollar pushed the euro, sterling, and yen lower while lifting the 2-year Treasury yield to 4.52%. Multiple Federal Reserve officials reaffirmed that strong economic conditions justify higher rates to reach their 2% inflation target.
Key points
Strong domestic hiring numbers provide the Federal Reserve with additional leeway to cont…: Strong domestic hiring numbers provide the Federal Reserve with additional leeway to continue tightening monetary policy.
Currency markets experienced broad declines against the greenback as the euro, sterling,…: Currency markets experienced broad declines against the greenback as the euro, sterling, and yen all dropped significantly.
Regional Federal Reserve officials remain focused on combating inflation through further…: Regional Federal Reserve officials remain focused on combating inflation through further interest rate increases despite equity market headwinds.
Sources checked by our analysis pipeline: 1
The Labor Department said US nonfarm payrolls jumped by 165,000 jobs last month, topping the 65,000 estimate of economists polled by Reuters, after an upwardly revised 60,000 gain in September. The unemployment rate dipped to 4.1%.
The report gives the Federal Reserve latitude to continue to hike interest rates, and market expectations for an increase of at least 25 basis points at the central bank's December meeting moved back up towards 80% in the wake of the report, according to the CME FedWatch Tool.
The dollar index, which measures the greenback against a basket of currencies, surged 0.77% to 102.26, with the euro tumbling 0.67% at $1.11437. The dollar was on track for its biggest daily percentage gain since June 17, while the euro was on pace for its biggest daily drop since October 1.
For the week, the dollar was up 0.3% while the euro shed 0.1% and was on track for a third straight weekly decline.
Expectations the Fed would hike next month had fallen to about 67% on Thursday as US equities plummeted, with the S&P 500…
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