# Dollar firms after U.S. labor data suggests more rate hikes
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-03
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Dollar Strengthens on Strong U.S. Job Data and Fed Expectations
Meta Description: The dollar strengthened on Thursday after unemployment claims pointed to a still strong U.S. jobs market and growing labor costs, indicating the Fed has more
URL: https://financedigest.com/dollar-firms-after-u-s-labor-data-suggests-more-rate-hikeshtml

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By Herbert Lash and Joice Alves

NEW YORK/LONDON (Reuters) – The dollar strengthened on Thursday after unemployment claims pointed to a still strong U.S. jobs market and other data showed growing labor costs, indicating the Federal Reserve has further to go in [raising interest rates](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") to tame inflation.

The yield on two-year Treasury notes, which are sensitive to interest rate expectations, shot to levels last [seen in July 2007 as the market perceives the Fed will raise rates](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May") further to curb rising consumer prices.

This move [higher that you’re seeing](https://www.financedigest.com/daimler-truck-sees-higher-returns-as-supply-chains-demand-improve.html "Daimler Truck sees higher returns as supply chains, demand improve") in U.S. rates is not happening in isolation,” said Alvise Marino, macro trading strategist at [Credit Suisse](https://www.financedigest.com/mitsubishi-ufj-to-postpone-at1-bond-issuance-in-credit-suisse-fallout.html "Mitsubishi UFJ to postpone AT1 bond issuance in Credit Suisse fallout") in New York.

Similar developments are happening in the rest of the world, in particular in Europe, mostly notably, where the inflation [data keeps](https://www.financedigest.com/auditing-in-cyber-how-organisations-can-keep-track-of-their-data.html "AUDITING IN CYBER: HOW ORGANISATIONS CAN KEEP TRACK OF THEIR DATA") on surprising relatively strong,” he said.

Atlanta Fed President Raphael Bostic said on Thursday that the U.S. central bank was ready to keep lifting rates higher if inflation doesn’t slow and was still mulling how recent, stronger-than-anticipated inflation [data might](https://www.financedigest.com/your-money-is-safe-but-your-data-might-not-be.html "YOUR MONEY IS SAFE, BUT YOUR DATA MIGHT NOT BE") shape Fed policy.

The impact of higher rates on the economy may only begin to “bite” in earnest this spring, an argument for the [Fed to stick with “steady” quarter-point rate](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike") increases, Bostic said.

There’s more and more of a [concern that incoming data is revealing that the Fed](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes") might be a little bit behind the curve than maybe they expected heading into this year,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets in Toronto.

Futures [edged higher](https://www.financedigest.com/londons-ftse-100-edges-higher-set-for-fourth-weekly-gain.html "London’s FTSE 100 edges higher, set for fourth weekly gain"), with the market pricing a peak rate climbing to 5.493% in the fed funds by September, before easing a bit later in the session to 5.447%.

The number of Americans filing new claims for unemployment fell again last week, pointing to a still strong [jobs market](https://www.financedigest.com/u-s-job-growth-surges-in-july-as-labor-market-defies-recession-fears.html "U.S. job growth surges in July as labor market defies recession fears"). Another Labor Department report showed labor costs grew much faster than previously estimated in the [fourth quarter](https://www.financedigest.com/german-gdp-contracted-by-0-4-in-the-fourth-quarter.html "German GDP contracted by 0.4% in the fourth quarter").

Graphic: US jobs https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/znpnbxnkepl/US\_jobs.jpg

The euro slid on data that showed inflation in the euro zone was not as high as [investors had feared but remains](https://www.financedigest.com/6-months-to-go-until-brexit-and-investor-sentiment-remains-bold.html "6 months to go until Brexit and investor sentiment remains bold") elevated. [Inflation eased to 8.5% from 8.6% in January on lower](https://www.financedigest.com/spains-inflation-to-be-lower-this-year-than-in-2022-minister.html "Spain’s inflation to be lower this year than in 2022 -minister") energy prices.

The dollar index, a basket of [major trading currencies](https://www.financedigest.com/u-s-dollar-advances-vs-major-currencies-as-risk-appetite-fades.html "U.S. dollar advances vs major currencies as risk appetite fades"), rose 0.623%, while the euro fell 0.71% to $1.0589.

The market’s reaction to the euro zone [data was muted at first following the euro’s 0.9% rise](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle") against the dollar on Wednesday, its biggest daily gain in a month, after data showed prices in Germany rose more than hoped last month.

Investors now see the ECB’s 2.5% deposit rate rising by a combined 100 basis points in March and May, then to around 4.1% at the [turn of the year](https://www.financedigest.com/2043-the-year-britain-will-turn-cashless.html "2043: The year Britain will turn cashless"). [Markets have priced in an extra 50 basis points of hikes](https://www.financedigest.com/instant-view-ecb-sticks-with-big-rate-hike-even-as-bank-fears-roil-markets.html "Instant View: ECB sticks with big rate hike even as bank fears roil markets") in just the past month.

Policymakers were split in February on the type of signal they should send about the ECB’s next rate move, [accounts of the central bank’s](https://www.financedigest.com/new-legislation-makes-switching-bank-accounts-simples.html "New legislation makes switching bank accounts “simples”") meeting on Feb. 2 showed on Thursday.

Sterling was held back by remarks from [Bank of England Governor Andrew Bailey](https://www.financedigest.com/boes-bailey-says-bank-reforms-worked-but-questions-about-liquidity-buffers.html "BoE’s Bailey says bank reforms worked but questions about liquidity buffers"), who said “nothing is decided” on future rate increases, which led traders to trim bets on higher rates. Sterling traded at $1.194, down 0.76% on the day.

The [Japanese yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor") weakened 0.44%, while the Australian and New Zealand dollars moved lower after strong gains on Wednesday driven by Chinese manufacturing data.

The offshore Chinese [yuan rose 0.70% to $6.9265 per dollar](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro").

[Investors are looking ahead to China’s](https://www.financedigest.com/oil-steadies-after-dipping-on-china-outlook-investors-await-fed-clues.html "Oil steadies after dipping on China outlook; investors await Fed clues") National People’s Congress meeting, which begins on Sunday, for guidance on policy support for the post-COVID recovery.

Bitcoin fell 0.81% to $23,442.00 after [shares of Silvergate Capital Corp fell more than half when the crypto-focused bank](https://www.financedigest.com/bank-shares-rise-after-credit-suisse-rescue-eases-crisis.html "Bank shares rise after Credit Suisse rescue eases crisis") delayed its annual report and said it had sold additional debt securities.

Currency bid prices at 3:24 p.m. (2024 GMT)

Description RIC Last U.S. Pct Change YTD Pct High Bid Low Bid

Clos Change

e

Prev

ious

Ses

sion

Dollar index 104.9700 104. +0.58% 1.430% +105.1800 +104.3300

3800

Euro/Dollar $1.0597 $1.0 -0.68% -1.10% +$1.0672 +$1.0577

670

Dollar/Yen 136.7450 136. +0.38% +4.29% +137.0900 +136.0300

2200

Euro/Yen 144.90 145. -0.27% +3.28% +145.5600 +144.7800

29

Dollar/Swiss 0.9415 0.93 +0.21% +1.84% +0.9439 +0.9395

98

Sterling/Dollar $1.1945 $1.2 -0.67% -1.23% +$1.2035 +$1.1924

025

Dollar/Canadian 1.3599 1.35 +0.05% +0.37% +1.3641 +1.3586

92

Aussie/Dollar $0.6731 $0.6 -0.41% -1.25% +$0.6766 +$0.6707

759

Euro/Swiss 0.9978 1.00 -0.44% +0.84% +1.0041 +0.9975

22

Euro/Sterling 0.8871 0.88 +0.08% +0.31% +0.8891 +0.8857

64

NZ $0.6220 $0.6 -0.57% -2.02% +$0.6257 +$0.6199

Dollar/Dollar 257

Dollar/Norway 10.4400 10.4 +0.32% +6.39% +10.4930 +10.3900

080

Euro/Norway 11.0618 11.0 +0.01% +5.41% +11.1216 +11.0599

610

Dollar/Sweden 10.5083 10.4 +0.13% +0.97% +10.5345 +10.4310

300

Euro/Sweden 11.1365 11.1 +0.13% -0.12% +11.1641 +11.1257

224

[(Reporting by Herbert Lash, Reporting by Joice Alves in London](https://www.financedigest.com/london-reclaims-place-as-preeminent-global-financial-centre-for-the-first-time-since-2013-according-to-global-regulatory-outlook-report-from-duff-phelps.html "London reclaims place as preeminent global financial centre for the first time since 2013, according to Global Regulatory Outlook report from Duff & Phelps"), additional reporting by Tom Westbrook in Singapore; editing by Emelia Sithole-Matarise and Nick Zieminski)


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