On Friday, the US Bureau of Labor Statistics reported that Nonfarm Payrolls (NFP) increased by 178,000 in March, significantly exceeding the consensus forecast of 60,000 jobs [1][2][3]. February's NFP figure was revised downward to a loss of 133,000 jobs, deeper than the previously reported decline of 92,000 [1][2][3]. The Unemployment Rate edged lower to 4.3% from 4.4%, falling below the Federal Reserve's long-run target of 4.5% [1][2][3]. Despite the robust headline jobs number, wage growth moderated, with Average Hourly Earnings rising by 0.2% month-over-month in March, below the 0.3% forecast and easing from 0.4% previously. On an annual basis, earnings increased by 3.5%, missing expectations of 3.7% and slowing from 3.8% [1][3].
The strong jobs report lent support to the US Dollar, with the US Dollar Index (DXY) consolidating gains above the 100 mark and up 0.06% on the day [1][2][3]. Currency pairs such as AUD/USD and USD/CAD reacted to the data, with AUD/USD trimming earlier gains and trading around 0.6900 after touching an intraday high of 0.6916 [1], while USD/CAD rose 0.14% to 1.3936, surpassing the April 2 high of 1.3933 [2]. EUR/USD showed limited reaction, trading in a tight range around 1.1534 amid thin liquidity due to the Good Friday holiday [3].
Market participants responded by scaling back expectations for Federal Reserve rate cuts, with traders increasingly pricing in a prolonged hold on rates. According to the CME FedWatch Tool and CBOT data, markets now expect rates to remain unchanged through 2026, and investors trimmed dovish bets, predicting the Fed would hold rates throughout the year [1][2][3]. The data reinforced the view that the Fed has room to keep interest rates unchanged for longer, especially as Oil-driven inflation risks persist [1][3].
Elsewhere, the Bank of Canada held rates steady on March 18, with Governor Tiff Macklem indicating that policymakers would look through immediate inflationary impacts from the Iran conflict but would act if price pressures proved persistent. The swaps market had priced in two BoC rate hikes for the second half of the year [2]. Additionally, China's Manufacturing PMI rose to 50.4 in March, up from 49 previously and above expectations of 50.1, which is relevant for the Australian Dollar due to Australia's close economic ties with China [1].
CONCLUSION
The stronger-than-expected US jobs report has bolstered the US Dollar and led markets to scale back expectations for Federal Reserve rate cuts, with a prolonged rate hold now anticipated. Currency pairs reacted modestly amid thin holiday liquidity, and central bank policy outlooks remain in focus as inflation risks persist. Overall, the labor market resilience supports a steady Fed stance, influencing global currency movements.