The dollar index vaulted higher on Friday, chalking up gains of 0.9% after U.S. employment nL1N34I2TY and ISM services nN9N32B01A came in so much stronger than forecasts that investors rushed to price in nearly 17bp of additional Fed hikes, while 2-year Treasury-bund yield spreads rose 10bp.
The 517k rise in payrolls was more than double the 185k forecast, and December and November were revised significantly higher.
The average workweek increased to 34.7 hours from 34.2, its highest since last March.
Average hourly earnings increased 0.3% month-on-month, though December was revised to 0.4% from 0.3%, bringing the year-on-year rate to 4.4% versus 4.3% forecast and 4.6% last.
The jobless rate dropped instead of rising, but that was largely due to annual population controls bolstering households data.
ISM non-manufacturing's biggest dollar bullish surprises were business activity and new orders surging to 60.4 from 53.5 and 45.2, respectively.
The employment index bounced to the breakeven 50 level from 49.4, with the index out of synch with very robust 471k increase in services jobs in the payrolls report.
The dollar index cleared its downtrend line from November before bumping into the underside of the broader pandemic uptrend line it broke below in January.
EUR/USD fell 0.8% despite above-forecast euro zone PPI nL8N34J2ER and ECB policymakers saying the central bank is set to raise rates again in May, not just March nL1N34J0FR.
USD/JPY surged 1.8% higher to its strongest since the 131.58 Jan.
18 spike high after that day's BoJ meeting wrong-footed traders by not increasing its 10-year JGB yield cap.
Prices may close above key hurdles, fostering further gains near-term nL1N34J1FD.
Because JGB yields remain highly restrained by the BoJ, the surge in Treasury yields had an outsized impact on USD/JPY versus the EUR/USD, as the 1% EUR/JPY rise highlights.
Sterling fell 1.2% on more morose UK data and weakening BoE rate hike guidance.
There's little on the U.S. release calendar until CPI on Feb.
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