US dollar sinks as unemployment rate hits the highest in 18 months

<p>The US dollar is softer against the euro, pound and yen following the August non-farm payrolls report. The US added 187K jobs compared to 170K expected but the market focus was on the unemployment rate, which rose to 3.8% from 3.5%. That's the highest since February 2022 and the long history of US employment data shows that when the unemployment rate rises 0.4 pp from the low, it continues to rise.</p><p>Part of the reason the unemployment rate rose was a rise in participation but the Fed will still see that as slack especially since earnings data was also slightly lower a +0.2% m/m vs +0.3% expected.</p><p>Here's a good point from Stephen Guilfoyle:</p><blockquote>"The most significant take-away form the BLS data: The civilian labor force increased by 736K individuals. The economy was only able to absorb a net 77K of them in August. This pushed the unemployment and underemployment rates higher, while suppressing wage growth."</blockquote><p>The main spot of US dollar weakness is USD/JPY as the pair fell nearly a full cent.</p><p>The euro and pound also fell sharply initially but have taken some of that back. The commodity currencies are lower against the US dollar but CAD is also dealing with the cross-currents from a weak Canadian Q2 GDP report.</p><p>So far, the 'bad news is good news' trend continues for stocks with futures up 0.7% but I worry that's on borrowed time. The Nov hike odds are down to 36% and once that hits zero, there are no hikes to 'price out' any longer and it will become a waiting game for cuts.</p>

This article was written by Adam Button at www.forexlive.com.