The dollar climbed to a two-month high after a Labor Department report showed the economy added more jobs than forecast last month, boosting bets the Federal Reserve will reduce stimulus.
The greenback gained as payrolls grew by 204,000 in October, versus the median forecast for a 130,000 advance.
The gains followed a revised 163,000 advance in September that was larger than initially estimated, Labor Department figures showed. The jobless rate rose to 7.3% from an almost five-year low.
The Fed will maintain the level of purchases at $85 billion of bonds a month until March, according to the median estimate of economists. A survey in September forecast the first reduction would be in December.
Analysts pushed out their projections following the government shutdown, which they estimated reduced growth by 0.3% point this quarter.
The Fed’s next policy meeting is scheduled for Dec. 17-18.
The dollar rallied the most on an intraday basis against the euro since December 2011 Thursday after the European Central Bank cut its benchmark interest rate to a record low 0.25% as a drop in inflation to the slowest pace in four years threatened its mission to keep prices stable.
The greenback extended gains after gross domestic product rose 2.8% on an annualized basis for the July to September period, topping the 2% forecast.
EURO
The euro extended its biggest two-week decline in more than a year versus the dollar as Standard & Poor’s lowered France’s credit rating after an interest-rate cut in the region Thursday.
The Standard & Poor’s lowered the country’s credit rating to AA from AA+. Standard & Poor’s raised concerns about the country’s growth prospects, saying the government’s reforms to taxation, as well as to labor and other markets, won’t substantially raise the country’s medium-term outlook.
The ECB lowered its benchmark interest rate to 0.25% from 0.5%, as forecast by three of 70 economists in a Bloomberg survey. The rest predicted no change. The ECB expects key interest rates to remain at the current level or lower for an extended period of time, President Mario Draghi said at a press conference after the announcement.
The euro earlier was stable after EU Services PMI prints came in above expectations overall. Rate currently holds at $1.3503. Services PMI prints during October surprised investors, surpassing previous estimates although coming in lower than September’s readings.
POUND
The pound weakened after the Bank of England held its key interest rate at 0.5% and its asset-purchase target at 375 billion pounds ($603 billion), matching the median forecast of economists.
Data released showed the UK trade deficit rose more than estimated during September, climbing to £9.816 billion vs. £9.557 billion (revised) from the previous month. Forecasts were calling £9.2 billion.
The pound rallied earlier in the week after a stronger-then-expected UK data, tha showed year-over-year UK Industrial Production rose by 2.2% in September, following a 1.5% drop in August. This is a more positive result that the forecasted 1.8% increase. UK Industrial Production grew by 0.9% between August and September, in comparison with the 1.1% decline registered between July and August and above expectations of a 0.5% rise.
On an annual basis UK Manufacturing Production grew by 0.8% in September, after decreasing 0.2% in August and slightly above expectations of a 0.7% rise. Between August and September UK Manufacturing Production rose 1.2%, following a 1.2% drop between July and August and exceeding market consensus of 1.1% growth.
YEN
The yen was too volatile during the week, but managed to close lower as the dollar was supported by strong economic data, including Q3 GDP and Payrolls.
COMMODITY CURRENCY
AUSSIE: The Australian dollar dropped after data showed the number of people employed rose just 1,100 in October, compared with an expected 7,500 rise. The unemployment rate remained unchanged at 5.7%. Moreover, the rate came under pressure after the shocking 28k full-time jobs lost in the country during the month of October.
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