The US job creation engine decelerated in April, relieving financial markets, but pointing to economic turbulence ahead. According to data released by the Bureau of Labor Statistics this morning, 175,000 jobs were added in the month, undershooting the 240,000 consensus forecast, and missing the 200,000 that is now believed sufficient to offset net growth in the labour force. Revisions to the prior months saw overall gains lowered by a total 22,000 positions.

The unemployment rate rose to 3.9 percent – above the 3.8 percent expected – and wage gains slowed, helping ease inflation fears. Average hourly earnings climbed 0.2 percent month-over-month, down from 0.3 percent, and were up just 3.9 percent year-over-year – the slowest annual gain since June 2021.

The dollar is dropping in line with a 10-to-12 basis-point move down across the Treasury yield curve as traders cut hedges against further rate hikes, and bet on a more aggressive easing campaign from the Federal Reserve. Equity futures, commodity prices, and risk-sensitive currencies are all rallying.

Bottom line: Signs of slowing momentum in the US economy are becoming more obvious, suggesting that the extraordinarily-wide expected growth and interest differentials that currently favour the US dollar are poised to narrow in the months ahead. An overvalued greenback may not remain so for long.

Risk appetite looks likely to remain well-supported into the weekend. Next week is light on economic data in the US and Canada, but a series of Fed speakers should keep things lively, helping add nuance (and noise) to Wednesday’s comments from Jerome Powell.