The US dollar is recovering, supported by data from the American labor market.

The U.S. dollar recorded a noticeable improvement during trading on Friday, following the release of important economic data in the United States, most notably the U.S. labor market report for November. This recovery came amid mixed expectations regarding the future monetary policy of the Federal Reserve.

Here are the key factors influencing the movements of the dollar:

Strong labor market performance boosts the dollar

Data from the U.S. labor market showed the addition of 227,000 new jobs in November, surpassing expectations that indicated only 200,000 jobs. Additionally, data for October was revised from 12,000 jobs to 36,000 jobs. Despite this, the unemployment rate rose to 4.2% compared to 4.1% the previous month, which aligns with market expectations.

The average wage also saw a monthly increase of 0.4%, exceeding expectations of 0.3%. Year-on-year, it recorded a growth of 4.0% compared to forecasts of 3.9%. These positive figures bolstered investors' confidence in the U.S. economy's ability to face challenges.

Bowman’s comments support cautious monetary policy

The remarks of Michelle Bowman, a Federal Reserve member, contributed to the dollar's gains, as she emphasized the need to be cautious in lowering interest rates, pointing out that inflation has not yet reached the targeted rate of 2%. She clarified that the U.S. economy shows considerable resilience, which requires calculated steps to ensure price stability in the long term.

Pressure from rate cut expectations weighs on the dollar:

Despite the support from positive data, the dollar faced pressure due to growing expectations for a rate cut, with current market forecasts showing an 88.8% probability that the Federal Reserve will cut the interest rate by 25 basis points during its next meeting, while the likelihood of keeping rates unchanged does not exceed 11.2%.

Dollar index movements and watch for inflation data

Under these factors, the U.S. dollar index rose by 0.22% to reach a level of 105.94 points. However, investors remain cautiously awaiting upcoming U.S. inflation data expected next week, which is anticipated to be decisive in determining the dollar's trajectory in the near term.

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