December Wage Growth Fuels Dollar’s Gains

The dollar is adding to its earlier gains against the major currencies as December U.S. wage growth exceeded expectations, and the year-over-year gain was at a seven year high. Although non-farm payrolls missed estimates, the sustained increase in incomes will help fuel economic growth.

Accordingly, the dollar picked up momentum against the yen and broke through the 50-hour moving average towards 117.00, a gain of more than 1% from Thursday’s close. EUR/USD moved away from 1.0600 back towards 1.0550 for a gain of 0.50% for the dollar.

The exception to the dollar’s gains is USD/CAD. Although the Canadian jobless rate rose to 6.9% from 6.8%, the rest of the December labor market report was very bullish for the loonie. The number of employed Canadians increased by 53.7K, well above estimates for a decline of 5K. Additionally, the Canadian trade deficit turned into a surplus of CAD530 million ($400.7 million), beating expectations for a widening to CAD1.6 billion.

By Caroline Williams