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The strong US jobs data has caused a repricing of the US rate and USD. This was an unexpected move, as implied probabilities derived from Fed funds futures ahead of today’s data showed just shy of a 70% chance that there would only be a 25 basis point hike in February—indicating that the market had read the slightly hawkish minutes from December’s Fed meeting cautiously.

However, with more than 100,000 jobs added to the economy than expected, the chances of a 50 basis point hike at next month’s meeting increased immediately, causing investors to take notice and adjust their positions accordingly. Following this news, the 10-year yield rose 8 bps on Thursday and is currently trading around 1.1%. Meanwhile, EUR/USD dropped 0.4%, GBP/USD fell 0.5%, and AUD/USD declined by 0.3%.

This latest development further highlights how important it is for traders to stay abreast of economic indicators like these as they can have significant effects on currency markets, both in terms of short-term movements across major pairs such as EUR/USD or long-term trends across emerging markets currencies like ZAR or MXN, which are sensitive to changes in global risk appetite levels stemming from events such as these.

CME FedWatch Tool – Probability of a 25 or 50 Basis Point Hike in Feb

CME FedWatch Tool
Source: CME, prepared by Richard Snow

The sizeable jobs number released on Thursday was indicative of a strong labor market and played into the Fed’s narrative that there is still more to be done about tightening. This sentiment was reflected in a repricing of US yields and the dollar, while the pound appears fairly susceptible after an impressive run against the greenback throughout 2022. GBP/USD had been flirting with 1.2000 before this move, but if it closes below this level, it could set up for an extended decline following any large NFP beat in future releases.

Daily GBP/USD Chart

Daily GBP/USD Chart


Given the large amount of high-importance USD data available between Friday and Thursday next week, coupled with a lack of UK data, this setup is expected to take 2-4 days. However, inflation data poses a major threat if it prints its sixth consecutive lower number (headline). As such, traders should be prepared for any potential volatility that could arise from this release.