Investing.com - The euro dropped more than 1% against the dollar on Friday after a better-than-expected U.S. nonfarm payrolls report for May bolstered expectations that the Federal Reserve will start raising interest rates later this year.
The Labor Department reported that the U.S. economy added 280,000 jobs in May, ahead of economists forecast for 220,000. The unemployment rate ticked up to 5.5% from 5.4 in the previous month.
April’s payrolls report was revised to show that 221,000 jobs were created.
Hourly earnings increased 0.3% in May, after a 0.2% increase in April.
The upbeat data, particularly the pick-up in wage growth underlined the view that the economy is on track to rebound after a weak first quarter and bolstered expectations that the Federal Reserve could start to hike interest rates at its September policy meeting.
The dollar rallied against the other major currencies following the release of the data.
EUR/USD fell to lows of 1.1050 before pulling back to 1.1113 in late trade, still down 1.11% for the day.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.93% to 96.38 late Friday.
The single currency had jumped to one-month highs against the dollar on Thursday boosted by a rally in bund yields after European Central Bank President Mario Draghi said that investors should get used to higher debt market volatility.
Speaking after the ECB voted to keep interest rates on hold at a record low on Wednesday Mario Draghi said markets should get used to periods of higher volatility in European bond markets, which he said won’t affect monetary policy decisions.
The ECB also revised up its inflation forecast for this year and said it saw no reason add more monetary stimulus following the recent rally in European bond yields.
In the week ahead, investors will be focusing on revised data on first quarter growth from the euro zone, while reports on euro zone industrial production will also be closely watched.
In the U.S., Thursdays retail sales report and Fridays report on consumer sentiment will be scrutinized for signs that the world’s largest economy is gaining momentum in the current quarter.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Wednesday as there are no major economic data releases scheduled.
Monday, June 8
In the euro zone, Germany is to release data on industrial production.
Tuesday, June 9
The euro zone is to release revised data on first quarter economic growth.
Thursday, June 11
The U.S. is to release reports on initial jobless claims and retail sales.
Friday, June 12
The U.S. is to round up the week with data on producer price inflation and consumer sentiment.