LONDON (Reuters) – The dollar jumped to near a three-year high against other major currencies on Friday after a strong rise in U.S. payrolls in June raised expectations the Federal Reserve may soon start curtailing its monetary stimulus.
European share markets initially jumped higher, boosted by the improving outlook for the U.S. economy, before falling back in choppy trade.
U.S. employers added 195,000 new jobs to their payrolls last month while the unemployment rate held steady at 7.6 percent as more people entered the workforce, the Labour Department said.
“This would certainly put us on track for that September time frame (for the Fed tapering),” said Kathy Jones, Fixed Income strategist at Charles Schwab. “I think this tells them (the Fed) the labour market is improving gradually.”
Economists had expected the data to show 165,000 jobs added last month and the jobless rate ticking down to 7.5 percent from 7.6 percent in May, a Reuters poll shows.
Immediately after the data the dollar was up 1.45 percent against a basket of major currencies at 84.44, just shy of a three-year high at 84.49 hit in May.
U.S. Treasury 10-year note yields hit a peak of 2.67 percent, their highest rate since August 2011, while stock index futures still signalled a sharp rise on Wall Street when trading resumes after the Independence Day holiday.
In Europe, where two major central banks on Thursday promised to keep policy loose to counter any withdrawal of funds by the Fed, the stronger-than-expected numbers sent share prices higher while German Bund futures fell.
The firmer dollar weighed on some dollar-priced commodities and gold slipped two percent to $1,225 an ounce. Copper was down 2.0 percent at $6,803 a tonne but tensions in Egypt lifted Brent crude oil to near $107 a barrel.