Dollar’s quick appreciation raises questions for markets

The United States’ employment records published on Friday exceeded the expectations of the consensus: 248,000 new employments were created instead of the expected 215,000, linking six months of growth in a row. Besides, for the first time since the crisis began, unemployment rate fell below 6%.

But not all that glitters is gold in the US labour market. There are no signs of salary increases and the percentage of active American workers remains at its lowest level since 1978.

When asked about the strength of the American economy, Ms Yellen always answers that inefficiencies in the labour market persist despite some positive indicators. However, markets understand that the US GDP could grow at a 3% yoy rate for the next three months –provided that both the annual advance of employment and the productivity growth continue.

And, if this happens, the Fed will have to bring forward the interest rate increase to the first quarter of 2015. Most analysts believe that the upward trend of the dollar will be more and more limited during the rest of the year.

Another different question is what will happen next year, especially if the gap between the growth in the US and the eurozone remains. For 2015, Morgan Stanley forecasts a Euro below 1.15 Dollar.

 

About the Author

Francisco López
Working for more than 25 years in the world of journalism and communications, Francisco has gained valuable experience at several well-known newspapers such as El Mundo and La Vanguardia. He specialized in economic and financial news before making the leap to the corporate communication sector where he has held several positions: Adviser to the Ministry of Economy, Director of the Bank of Spain’s Communication Department, in addition to his consultancy role at Analistas Financieros Internacionales, where he currently works.

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