The U.S. Department of Labor said the economy added 114,000 jobs in September, pushing the unemployment rate down to 7.8% from 8.1% the previous month, the lowest level since January 2009.
The report came after upbeat U.S. data on manufacturing and services earlier in the week and fuelled hopes that the economic recovery may be gaining momentum.
The dollar rose to a two-week high against the traditional safe-haven yen following the data, settling at 78.65 at close of trade.
The yen had strengthened against the dollar earlier in the day after the Bank of Japan announced no changes to monetary policy at the conclusion of its policy setting meeting, disappointing some market expectations for more easing measures.
Market sentiment had been boosted on Thursday after European Central Bank President Mario Draghi reiterated that the single currency is “irreversible” and said that the bank was ready to buy the debt of distressed euro zone states.
The ECB left rates on hold at a record low 0.75% at its policy meeting, in a widely anticipated decision.
On Tuesday, Spain's Prime Minister Mariano Rajoy downplayed the possibility that Madrid would request a full-scale sovereign bailout, saying it was not certain that the country would ask for external financial assistance.
Spain has seen borrowing costs fall in recent week in anticipation that it will soon request a bailout. The yield on Spanish 10-year bonds settled at 5.66% on Friday, down from 6.83% at the start of September.
Elsewhere, the Australian dollar ended the week close to a two-and-a-half month low against the greenback, after the Reserve Bank of Australia cut interest rates to 3.25% from 3.5% on Tuesday, the third rate cut in six months, citing a worsening outlook for the global economy and signs of a weakening local labor market.
On Wednesday, official data showed that Australia posted the largest trade deficit in three-and-a-half years in August as export demand slowed.
Meanwhile, the New Zealand dollar ended the week lower against the greenback after official data showed that growth in China’s service sector moderated in September, underlining concerns over a slowdown in the world’s second largest economy. China is New Zealand's second largest trading partner and Australia's largest export destination.
In the week ahead, market participants will be closely watching the outcome of a meeting of euro zone finance ministers on Tuesday, where a possible bailout for Spain is expected to be on the agenda.
Meanwhile, markets in Japan and the U.S. are to remain closed for holidays on Monday.
Ahead of the coming week, Forex trading outlook today has compiled a list of these and other significant events likely to affect the markets.
Monday, October 8
Markets in Japan are to remain closed for a national holiday.
Australia is to publish a report on job advertisements, an important indicator of demand in the labor market. Later in the day, New Zealand is to produce a report on business confidence, a leading indicator of economic health.
In the euro zone, finance ministers from the currency bloc are to hold a day of talks in Brussels. The euro zone is also to release data on investor confidence, while Germany is to publish data on industrial production.
Elsewhere in Europe, Switzerland is to publish official data on consumer price inflation, which accounts for the majority of overall inflation.
Also Monday, markets in the U.S. and Canada are to remain closed for the Columbus Day holiday.
Tuesday, October 9
Japan is to publish official data on the current account, which is linked to currency demand. Australia is to release a report on business confidence, while New Zealand is to produce industry data on house price inflation.
The U.K. is to publish official data on manufacturing production, a leading indicator of economic health, as well as a report on the country’s trade balance, the difference in value between imports and exports. In addition, the U.K. is to release industry reports on retail sales and house prices.
Meanwhile, finance ministers from the euro zone are to hold a day of meetings in Brussels.
Wednesday, October 10
Australia is to publish data on consumer sentiment, a leading indicator of consumer spending.
In the euro zone, France and Italy are to publish official data on industrial production, a leading indicator of economic health.
In the U.K., Bank of England Governor Mervyn King and several members of the monetary policy committee are to appear before Parliament's Treasury Committee to testify on inflation and the economic outlook.
Later in the day, the U.S. Federal Reserve is to publish its Beige Book, which outlines current economic conditions.
Thursday, October 11
Japan is to publish official data on machinery orders, a leading indicator of production. In addition, the Bank of Japan is to publish the minutes of its most recent monetary policy meeting, which contain insights into current economic conditions from the bank’s perspective.
Australia is to publish government data on employment change and the unemployment rate, a leading indicator of economic health. The country is also to release a report on inflation expectations.
The ECB is to publish its monthly bulletin, with looks at current and future economic conditions from the bank’s perspective.
Canada is to publish official data on its trade balance as well as an industry report on house price inflation, a leading indicator of the health of the housing sector.
The U.S. is also to publish government data on the trade balance, in addition to official data on initial jobless claims, import prices and crude oil stockpiles.
Also Thursday, finance ministers and central bankers from the G7 group of industrialized nations are due to hold talks in Tokyo.
Friday, October 12
Japan is to publish official data on tertiary industry activity, a leading indicator of economic health.
The euro zone is to release official data on industrial production, an important indicator of economic health.
The U.S. is to round up the week with official data on producer price inflation, a leading indicator of consumer inflation. In addition, the University of Michigan is to release preliminary data on consumer sentiment, a leading indicator of economic health.
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