(ShareCast News) - Friday saw a slew of economic data released for the US, including the non farm payroll, unemployment rate and services PMI.
All figures released helped the dollar recover from Thursday's "tax plan slump", even the non farm payrolls which missed the mark and came in bellow expectations, but was a massive improvement on last months figure.
The unemployment rate in the states came in slightly better than expectations with a print of 4.1% with the services sector expanding more than expected with a reading of 60.1, and non farm payroll came in way below analysts expectations of 312,000 to show that 261,000 jobs had been created, a massive improvement on last months revised figure of just 18,000.
All this positivity helped the greenback push higher on Friday, with the dollar index trading 0.28% higher to 94.947, on track for a third straight week of gains.
"Wages were flat, last month we saw a little bit of a surprise bump upward in that so we were expecting a more moderate number there," said Sean Lynch, co-head of global equity strategy at Wells Fargo Investment Institute in Omaha, Nebraska.
With Friday's data releases, expectations for a December rate hike have solidified further, with Vassili Serebriakov at Credit Agricole saying, "From a dollar perspective the December hike is a done deal, but the Fed is planning to hike three times next year and we didn't get a hawkish shift in terms of a new Fed chair," adding, "So with the kind of inflation numbers we're getting now, three hikes is starting to look optimistic."
Closer to home in the UK, sterling received some much needed respite following Thursday's massive move lower, which it received in the form of an expectation beating services PMI figure of 55.6.
At it's highest point of the day, cable was able to recover almost half of the losses it suffered yesterday, hitting 1.3136 by midday, only to fall back slightly to trade 0.12% lower at 1.3074.
Thursday's drop in the pound came in the wake of dovish tones from the Bank of England following a rate increase from the Bank of England (BoE) which voted 7-2 to increase its benchmark Bank Rate to 0.50% from 0.25%, reversing an emergency cut made in August 2016, shortly after the shock decision by British voters to leave the European Union.
It was the first time that the BoE has increased borrowing costs since 2007, before the eruption of the global financial crisis, which tipped Britain into its deepest recession in decades.
BoE Deputy Governor Ben Broadbent told BBC radio, "Given all the other things we assume in our forecasts, many of which will be misses, we anticipate we will need maybe a couple more rate rises to get inflation back on track while at the same time supporting the economy."
The pound also gained ground against the euro, trading 0.56% firmer to 1.1267, while EUR/USD slumped 0.4% to 1.1610 after hitting a day high of 1.1693 following the non farm release.
Speaking at an event organised by the policy think tank OMFIF, European Central Bank (ECB) Governing Council member Ewald Nowotny said, "This goal of 2 percent or 1.9 is something that will not be easily reached in the years to come," adding, "If things go well as we think in the economy, there are good reasons then (from next September) to start to taper."
Dollar strength helped the greenback to break the tight 3 day trading range of 113.83/114.27 against the Japanese yen on Friday to 114.28, up 0.18% on the day as US President Trump starts the first leg of his Asia tour.
The Australian dollar took a hit on Friday following the release of flat retail sales figures that came in at 0%, missing expectations of 0.4%, trading 0.89% lower against the dollar to 0.7645.
"The overall story in the broad retail sector is still one of slow growth, as both volumes of spending growth is low and retailing pricing power is weak," said Diana Mousina, senior economist at AMP Capital.
"With the outlook for the consumer this uncertain we remain comfortable with our view that rate hikes are unlikely to occur until the very end of 2018."
The Aussie's Antipodean cousin, the New Zealand dollar, edged 0.09% lower to 0.6906, staying below a seven-day high of $0.6944 touched the previous session.
"As the political dust has settled we are not particularly surprised to see the NZD almost a cent off last week's lows," said Sharon Zollner, senior economist at ANZ Bank.
"But whether it pushes up towards 70 cents is likely to hinge on USD developments."
Earlier this week, data showed New Zealand's jobless rate hit a nine-year low last quarter as employment surged past all expectations, fueling hopes for a revival in wage growth.