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FX round-up: Dollar climbs as payrolls report beats expectations

The dollar rose after official figures showed earnings for US workers rising faster than expectations, fuelling expectations of interest rate rises to come.
Average hourly earnings rose 2.9% year-on-year in January - faster than the 2.5% rate in December and ahead of analysts' expectations for 2.6% growth. The US added 200,000 jobs - higher than the 180,000 figure pencilled in by economists.

The data stoked inflation expectations and speculation that the Federal Reserve's open market committee, under new chairman Jerome Powell, would increase borrowing costs at least three times this year.

Rising wages snapped the dollar out of its recent torpor. It climbed 0.7% against against the euro at 15:18 GMT to value a euro at $1.2422 and by 1% against sterling to make a pound worth $1.4119. The dollar climbed 0.9% against the yen to 110.35 yen.

But Neil Wilson, senior market analyst at ETX Capital, said the dollar's rise could be short-lived. Some commentators have argued the Trump administration is trying to talk the dollar down to boost trade in what Pimco has referred to as a "cold currency war" that saw the dollar drop more than 10% in 2018.

Wilson said: "Although the dollar popped, it is doubtful that this marks a reversal in the downtrend. There will need to be a lot more to lift the dollar from its stupor than a recalibration of the number of hikes this year as rising yields have not produced a firmer dollar ... Nevertheless, the dollar is responding somewhat to a modest change in monetary policy expectations that the wage data implies."

The pound fell for the second day running against the euro after a survey of construction activity showed the sector was close to contracting. The report came a day after weak manufacturing data and with questions continuing to swirl about Britain's Brexit strategy and the health of the economy. Sterling fell 0.3% to 1.1366.