Article by ForexTime
The dollar took a breather from its strong rally on Friday in the aftermath of the strong US jobs data.
The forecast-beating figures bolstered bets the Federal Reserve would raise interest rates in mid-2015. The European Central Bank, by contrast, is set to loosen policy further as part of efforts to rescue a moribund euro zone economy, the chief argument for a weaker euro.
As a result the euro weakened further against the dollar to $1.2530, just above to a two-year low of $1.25005 hit in US trading on Friday.
Against the yen, the dollar was within touching distance of levels not seen since before the 2008 financial crisis. In early Monday trading the greenback hovered just below the key 110 yen level in thin volumes due to a holiday-marked Asian session. Trading activity was lighter than usual in Asia, market participants said, with Singapore and most of Australia closed for holidays, and Typhoon Phanfone battering the Tokyo area earlier in the day.
One thing to note though about Friday’s US jobs number sis that while the world’s largest economy is hiring at a brisk pace and unemployment has sunk to a nearly healthy rate, wages are still not growing. If American consumers have less money to spend and save, this in turn, keeps the economy from strengthening further.
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Whatever meager pay raises most workers have received in this recovery have been all but eaten up by low inflation. This will influence when the Federal Reserve decides to start raising interest rates. Without more pay raises spreading across the US economy, the Fed has less pressure to raise rates from record lows (currently near zero).
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