FOREX-Dollar strengthens versus euro and Swiss franc after blowout jobs data

The dollar rallied against the euro ​and Swiss franc on Wednesday following surprisingly strong employment data ‌that ​suggested underlying U.S. economic health. U.S. employers added 130,000 jobs in January, surpassing the 70,000 jobs that economists polled by Reuters had estimated, and indicating that the Federal Reserve would continue holding off on further rate cuts.

The unemployment rate fell to 4.3% in January from 4.4% ‌in December, according to the U.S. Labor Department. The dollar rose 0.42% to 0.7711 against the Swiss franc . The euro was down 0.18% against the dollar at $1.187425.

"The dollar is rallying on the back of a much stronger-than-expected jobs report and firm earnings, said Joel Kruger, market strategist at LMAX Group in London. "While risk assets are also higher as the data trims but does ‌not derail expectations for a June Fed cut, creating a near best-case outcome for both the buck and broader markets." Ahead of the jobs data, traders had been speculating that the ‌number could be on the low side, which was seen as negative for the dollar. That narrative was supported by data showing slower-than-expected retail sales in December on Tuesday and following comments from White House economic adviser Kevin Hassett on Monday that Americans could see smaller job growth numbers in the coming months.

Markets are now pricing in a 94% chance that the Fed will leave rates unchanged at its next meeting, up from 80% from ⁠the previous day, ​according to the CME's FedWatch tool. "There still ⁠is some skepticism towards the dollar but recognizing that the market was leading the wrong way ahead of the jobs data," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. "The market is still pricing ⁠in 50 basis points of cuts this year. If Kevin Warsh gets confirmed on time as Fed chair, his first meeting will be in June, where markets have gone from pricing in a 97% ​chance of a cut to about 70%."

Sterling was down 0.14% against the dollar to $1.36215. The dollar index was flat at 96.92. YEN CONTINUES ADVANCE

The Japanese yen continues ⁠to outperform in the aftermath of Prime Minister Sanae Takaichi's landslide election victory although the currency has pared some of those gains against the dollar. Beyond Takaichi's election, the yen will consolidate its strength by downside surprises in Japanese inflation, continued rotation ⁠out ​of U.S. big tech, early budget talks in coming weeks, and normalization of hedged Japanese yields with the rest of the world, said TS Lombard analyst Freya Beamish in an investor note.

The yen strengthened 0.75% against the greenback to 153.22 per dollar, on track for the third straight session of gains. The yen was also stronger against the euro and was last ⁠up nearly 1% at 181.905, poised for the third consecutive session of gains against the single currency.

The Australian dollar rose to a three-year high after Reserve Bank of Australia ⁠Deputy Governor Andrew Hauser said inflation was too ⁠high and policymakers were committed to doing whatever was necessary to bring it to heel. The Aussie was last up 0.69% versus the greenback to $0.71235. It rose as high as $0.71430, reaching its highest level since February 2023.

The Swedish crown weakened 0.09% versus the dollar to 8.9. ‌The dollar weakened 0.05% to ‌6.908 versus the offshore Chinese yuan.