Investing.com -- EUR/USD rose sharply on Friday moving above 1.10 for the first time in March, as investors dismissed the possibility of a March interest rate hike by the Federal Reserve after average hourly wages fell slightly last month.
The currency pair traded between 1.0905 and 1.1043, before settling at 1.1006, up 0.0049 or 0.45% on the session. After opening March at near three-week lows, the euro has closed higher against the dollar in each of the last three sessions. Previously, the euro tumbled nearly 4% against its American counterpart amid strong indications that the European Central Bank will use nearly all of the tools at its disposal next week to help bolster weak economic growth throughout the euro zone.
While Friday's monthly jobs report from the U.S. Department of Labor could mostly be characterized as positive, investors focused on a slight decrease in average hourly earnings by 0.1% in February following robust gains of 0.5% a month earlier. It marked the first decline in hourly wages for a single month since the end of 2014. For all employees on private nonfarm payrolls, average hourly earnings fell 0.03 to $25.35 following gains of 0.12 in January. Wages among nonsupervisory employees and workers in private-sector production were unchanged at $21.32 an hour. On an annual basis, average hourly earnings rose by 2.2%, falling by 0.3% from the previous month after a host of state minimum wage increases went into effect at the start of the year.
Over the last several years, the Federal Open Market Committee has expressed significant concerns related to the slow pace of wage growth, as the U.S. economy continues to recover from the Great Recession. The disappointing reading could compel the U.S. central bank to delay the timing of its next interest rate hike beyond the first half of 2016. At the end of last year, the FOMC raised the target range of its benchmark interest rate by 25 basis points to 0.25 and 0.50%, ending a seven-year zero interest rate policy.
The CME Group's (NASDAQ:CME) Fed Watch tool lowered the probability of an interest rate hike at the FOMC's meeting on March 15-16 to 1.9% on Friday, down from 29.6% a day earlier. There is still a 32% chance the FOMC will raise rates in June, according to the CME, up from 4.2% a month ago.
Nonfarm payrolls, meanwhile, soared by 242,000 in February, above consensus estimates of 190,000 and significantly higher than January's upwardly revised total of 172,000. The Labor Department reported employment gains in Health Care, Social Assistance and Food Services and Drinking Places, while recording losses in the struggling mining sector. Since December, the U.S. economy has added an average of 225,000 jobs per month.
The unemployment rate remained steady at 4.9%, one month after falling to its lowest level in eight years. The U-6 unemployment rate, which measures the level of workers that are marginally attached to the labor market, fell 0.2 to 9.7%. By comparison, the Fed's preferred gauge of U.S. unemployment, peaked at 18% in 2010 at the end of the Financial Crisis.
Investors turn their attention to the ECB's monetary policy meeting next Thursday in Frankfurt, where its Governing Council is widely expected to approve a wide range of stimulus measures. When the central bank last met in January, it held its benchmark interest rate at a record-low of 0.05. Next week, the ECB could lower its deposit and margin facility rates, while increasing the scope of its €60 billion a month bond buying program.
Yields on the U.S. 10-Year rose four basis points to 1.87%, while yields on the Germany 10-Year soared seven basis points to 0.24%. Yields on both government bonds are down by more than 10 basis points over the last year. On Friday, yields on 10-year Treasuries reached an intraday high of 1.902%, considerably above their low from Feb. 11 when they slid to 1.53%.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.40% to an intraday low of 97.03, before rallying to 97.25 at the close.
Any rate hikes by the Fed this year are viewed as bullish for the dollar, as investors pile into the greenback to capitalize on higher yields.