While we were focused on developments on the East side of the Atlantic last week (including the ECB meeting), the market’s focus is shifting westwards this week, with the May Federal Reserve meeting set to conclude tomorrow and the always-impactful Non-Farm Payrolls report on Friday.
Just a couple of weeks ago, the dollar was languishing in the doldrums. This was in part due to that disappointing US jobs report which helped to lower expectations for aggressive rate hikes from the Fed and partly because of trade war concerns. Well, since then, the markets’ expectations over short-term rate rises have been on the rise again as geopolitical tensions abated and incoming data has been mostly positive.
Prior to the nonfarm payrolls release, the dollar looked strong and many wondered whether the beleaguered currency had finally bottomed out. All eyes were on the average hourly earnings part of the report and as it turned out, the 0.3% reading was indeed in line with the expectations, which lifted the year-on-year wage growth rate to a good 2.7%.
It’s not often that the see a miss of around 88,000 in the US job creation figures and markets shrug it off but that’s exactly what we’ve seen today. The U.S. jobs report was somewhat overshadowed this week by the ongoing back and forth between the world’s two largest economies, which has threatened to disrupt the period of strong growth the global economy is seeing.
The employment situation for Friday, April 6, 2018: Total nonfarm payroll employment edged up by 103,000 in March, and the unemployment rate was unchanged at 4.1%, the U.S. Bureau of Labor Statistics reported today. Employment increased in manufacturing, healthcare and mining.
So far, China’s response has only been on the aluminum and steel tariffs, announced by the White House last month, and not on the proposed $60 billion in annual tariffs against Chinese products. This shows Beijing is unwilling to enter a trade war with the United States, knowing that it has more to lose than to win. However, trade dispute will continue to dominate investors’ decisions heading into Q2.
This is one busy week and the main event, Friday’s jobs report, is set to close things out at 7:30 am CT. The focus has shifted away from job creation and is now on wages. While Non-farm Payroll takes the cake, this is a potent combination throughout the week. Kicking things off is ISM Manufacturing on Monday at 9:00 a.m. Central.