The US nonfarm payrolls report (NFP) on Friday will cap off a rollercoaster week for investors. Economists expect another month of robust job creation for the US economy, giving the Federal Reserve the justification it needs to begin raising interest rates later this month.

Friday’s report is expected to show the creation of 190,000 nonfarm jobs in November, according to a median estimate of economists polled by Bloomberg.[1] A separate poll conducted by Reuters shows expectations for an increase of 200,000.[2] The unemployment rate is forecast to hold at a more than seven-year low of 5%.

October NFP Report

US employers added 271,000 jobs in October, the biggest monthly increase since December 2014, the Labor Department reported on 6 November. Unemployment also fell 0.1 percentage point to 5%, the lowest level since April 2008. A separate gauge of labor earnings showed average wages expanded 0.4% in October, double the rate of forecasts and well above the September rate of zero.

The October NFP report crushed estimates, signaling to markets that the Fed would be ready to increase interest rates at its final policy meeting of the year on December 15-16.

Rate-Hike Bets Increase

Expectations for a rate rise spiked following the October NFP report, with US rate futures implying a more than 70% chance of tighter policy in December.[3]As a result, the US dollar surged 3% in November, reaching an eight-month high against a basket of world currencies.

The US dollar, which benefits from higher interest rates, has seen a burst of energy since July 2014, around the time market participants began speculating about a shift in US policy. The greenback has risen a staggering 24% over that period on the expectation of a rate rise. Although some observers suggest the dollar will continue to surge in the new-year, the extent of that momentum will probably be contained, given that higher rates have already been priced into the markets.