How the U.S. Jobs Data Will Affect Interest Rates Hike

Investors in Asia were hopeful that the US job reports due for release on Friday in the US trading session will be positive. The Asia trading session on March 3 had a majority of the investors convinced of reliable reports from the US making the dollar gain marginally against other major currencies. A positive report will boost confidence in the market that the Federal Reserve will hike US interest rates this year.

The Australian dollar also gained significantly as a result of the better-than-expected growth data that was released in the previous session. With the bullish sentiment dominating the market in the Asian trade session, the dollar rose back above 114.00 against the Yen and looks set to reach a two-week high of 114.56. The Dollar gains with Friday’s U.S. jobs data in focus are expected to be capped until the investors confirm their expectations with the release of the US non-farm payrolls report.

ADP Report

The ADP National Employment Report revealed that the US private sector jobs rose to 214,000 in February. Based on these numbers from the private sector, investors are speculating that Friday’s payrolls report will also post better-than-expected results. Nonetheless, a Federal Reserve survey discovered that there were variable economic conditions across various sectors. These variations have raised doubts about the exact state of the employment scene in the US job market for the Fed policymakers. This mystery will significantly affect the decision that the Fed Reserve will make about the interest rates when they meet on March 15-16.

US Interest Rate Hike

Experts believe that there is a mere 4% chance of the Fed raising interest rates at their forthcoming meeting. The improving employment conditions will increase the likelihood of the interest rates being raised later on in the year which would significantly strengthen the dollar. The strong data reports released by a majority of the US economic sectors have made the dollar retain its bullish trend against all the main world currencies.

Moreover, the stabilizing oil prices have also helped in the underpinning of the US dollar as more investors gain confidence in the performance of the currency. Consequently, with the European Central Bank expected to maintain its rock-bottom interest rates, investors are turning to the dollar as a haven currency.

Our Conclusion,A stronger dollar translates to a healthy economic growth environment in the US. The enhanced economic growth rate will convince the Fed Reserve to hike the interest rates. Nonetheless, there is a minimal chance of the central bank increasing the rates at their next meeting. The better-than-expected reports mean that the economy can support a rate hike by the end of 2016. The excellent reports will hence influence the decision made by the Fed Reserve on increasing interest rates later in the year.

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