Investing.com - The U.S. dollar ended higher against a basket of major currencies on Friday, reversing earlier losses as traders stuck to bets that the Federal Reserve will still raise interest rates before the end of the year after a tepid employment report for August quashed most talk of a move as early as this month.
The U.S. economy added 151,000 jobs in August, disappointing expectations for an increase of 180,000, the Labor Department said. The number of jobs created increased by 275,000 in July, whose figure was revised from a previously estimated 255,000 gain.
The unemployment rate remained unchanged at 4.9% this month, confounding expectations for a downtick to 4.8%.
The report also showed that average hourly earnings rose 0.1% in August, below expectations for a 0.2% increase.
The disappointing data dampened expectations for a near-term rate hike, as Fed officials recently indicated that the pace of interest rate increases will be data-dependent.
According to Investing.com's Fed Rate Monitor Tool, investors are pricing in a 21% chance of a rate hike at the Fed's September 20-21 meeting, down from 27% ahead of the employment data. December odds were at around 50%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, initially fell to a daily low of 95.18 before reversing losses to end the day at 95.87, up more than 0.2%, as investors still believe the Fed will hike rates before the end of the year, most likely in December.
The greenback ended the week with a gain of 0.3% after hawkish signals from senior Fed policymakers, including Janet Yellen and Stanley Fischer, revived speculation of a near-term rate hike.
Against the yen, the dollar spiked nearly 0.7% to end at 103.91 by late trade after touching 104.32, the most since July 29. For the week, the pair jumped 2.1%, the second straight weekly rise.
The yen was also pressured amid mounting expectations the Bank of Japan will unveil fresh stimulus at its September policy meeting to boost sluggish inflation.
The euro, meanwhile, slipped 0.4% to settle at 1.1155, retreating from a session high of 1.1252 touched shortly after the release of the disappointing jobs report.
Elsewhere, the pound settled 0.2% higher at 1.3295 against the greenback after hitting a one-month peak of 1.3352. The pair tacked on 1.2% on the week, the third weekly gain in a row, amid easing concerns over the post-Brexit economic outlook.
Research group Markit said on Friday that its U.K. construction purchasing managers’ index rose to 49.2 in August from 45.9 the previous month, beating expectations for an increase to 46.1.
The data came a day after Markit said its U.K. manufacturing PMI rose to a 10-month high this month, easing concerns over a potential economic slowdown in the U.K. following the June 23 vote to leave the European Union.
In the week ahead, market players will be focusing on the outcome of Thursday’s European Central Bank meeting to see if policymakers will step up monetary stimulus to boost inflation and prop up the economy.
Elsewhere, China is to release what will be closely watched trade and inflation data amid ongoing concerns over the health of the world's second biggest economy.
In the U.S., a report on service sector growth will be the highlight of the holiday-shortened week. U.S. markets will remain closed on Monday for Labor Day.
Meanwhile, in the U.K., traders will be awaiting data on activity in the services sector for further indications on the continued effect that the Brexit decision is having on the economy.
Outside the G7, market participants will be awaiting a monetary policy announcement from the Reserve Bank of Australia on Tuesday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, September 5
Australia is to release data on company operating profits.
China is to publish its Caixin services PMI.
Finance ministers and central bankers from the G20 group are to hold a summit meeting.
The U.K. is to release its services PMI
Financial markets in the U.S. and Canada are to remain closed for the Labor Day holiday.
Tuesday, September 6
The Reserve Bank of Australia is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.
In the U.S., the Institute of Supply Management is to release its services PMI.
Wednesday, September 7
Australia is to release data on second quarter economic growth.
The Swiss National Bank is to produce data on foreign currency reserves.
The U.K. is to report on manufacturing and industrial production.
The Bank of Canada is to announce its benchmark interest rate and publish its rate statement.
Thursday, September 8
Australia and China are both to report on their respective trade balances.
The European Central Bank is to announce its benchmark interest rate. The policy meeting is to be followed by a press conference with President Mario Draghi.
Canada is to produce report on building permits and new house price inflation.
The U.S. is to release the weekly report on initial jobless claims.
Friday, September 9
China is to release data on consumer and producer prices.
Canada is to wrap up the week with the monthly employment report.