The USD Rise on Better Hourly Earnings and a fall in Unemployment Rate

The USD, on Friday, gained against major currencies on news of better Non-Farm Reports. Despite more job losses—pinned to coronavirus lockdowns in some major cities in the United States, the unemployment rate fell to 6.7 percent. In comparison, workers on average posted higher hourly earnings—0.8 percent change on a month-to-month basis. Changing dynamics in the United States' job market now triggers optimism and might even spark demand for the USD in the immediate term.

Details: 

Coinciding with positive developments in the United States and perhaps the reversal of the dollar after sinking to a new two-year low, losing 14 percent since March. It can be because of the confidence people have in the Coronavirus vaccine and the resumption of normalcy. For instance, weekly jobless claims declined more than expected. Coupled with expectations of more stimulus, the economy might end up recovering at a faster rate. Already, following last week's runoff election in Georgia, the President-elect Joe Biden will easily implement some of his agendas more smoothly from a legislative level. He has control of the White House and the Congress. Therefore, with a higher stimulus, it is expected that the rising bond yields, a development that could attract capital for relatively high-quality US debt instruments, a net positive for the USD. Overly, the USD's recovery could portend trouble for currencies of emerging economies, most of whose debts are denominated in USD and therefore more sensitive to price fluctuations.

Impact on the USD: 

Bullish. After losing 14 percent from March 2020, better NFP data could signal that the greenback's slump is over, and its prices could appreciate in Q1 2021 versus other major currencies and commodities.

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