Euro drops to 6-month low after blockbuster U.S. jobs report

Frankfurt (Nov 6)  The euro fell to its lowest level in more than six months Friday after a blockbuster October jobs report raised the likelihood of an interest-rate increase in December to a near certainty.

The shared currency EURUSD, -1.3139%  fell to $1.0706 after the report, its lowest level since April 23, according to data from FactSet, compared with $1.0885 late Thursday in New York. The pound GBPUSD, -0.8614% fell to a low of $1.5029, also a six-month low. It traded at $1.5217 Thursday.

The dollar USDJPY, +1.19%  briefly traded at ¥123.04, its highest level since Aug. 21, compared with ¥121.68 Thursday.

According to the Labor Department, the U.S. economy added 271,000 jobs in October — the largest monthly gain this year. The number exceeded a consensus forecast of 177,000 new jobs from a MarketWatch survey of economists.

The data also revealed a long-awaited acceleration in hourly wage growth. Average hourly earnings increased by 0.4% in October, the fastest year-over-year pace since the U.S. exited recession in mid-2009. Wage growth, an important driver of inflation, has been slowly creeping higher all year. The unemployment rate also ticked lower to an even 5%.

Read: ‘Off the charts’ data pushes December rate-hike odds way up

Traders and market strategists now believe it is extremely likely that the Fed’s rate-setting committee will vote to raise its target benchmark interest rate at its December meeting, which hasn’t been done since 2006.

“The expectations for a September rate increase have gone up substantially,” said Colin Cieszynski, chief market strategist at CMC markets. “And we’ll probably get at least one more hike out of them in March.”

The dollar had been trending higher all week as Fed policy makers assured investors that they might still hike the benchmark rate in December, provided there was a solid rebound in employment gains.

The ICE U.S. Dollar index DXY, +1.17% a measure of the dollar’s strength against a basket of six currencies, was up 1.4% to 99.2950, its highest level since mid-April.

Short-term Treasury yields rose to their highest levels in five years, with the two-year yield gaining 6.8 basis points to 0.910%. Short-term rates reflect investors’ monetary policy expectations.

Source: MarketWatch