The Fed stayed away from pulling any punches during their first meeting for this year and if you marvel why? The reason is as simple as it can be! They have become the slave of the global market volatility and this has pushed back any expectations which were in line with the dot plot plan according to which they could have been incrementing the interest rates 3-4 times this year. The upcoming US NFP payroll could thwart those expectations even further if it confirms that the frailty is the chief theme in the labour market as well.
The Fed has not only become dependent on the domestic matters, but they have also tuned their station to offshore market volatility, which is evoked due their decree of a rate hike. One affair which is still apathetic today is the rout in the oil price. Although, we are confident that a bottom could be forming between $20-30 mark, if it is not already formed, but every single adverse headline for oil is impacting the sentiment for the global market.
Therefore, the Fed is largely in the watch and wait mode and any rebellious economic condition will push their hand to make a U turn on their current policy. Emerging markets are paying their price and investors are losing their confidence if the central banks have the correct vaccination because every single medicine appear to have less influence in contrast to the preceding one.
Thus, the upcoming US NFP data without any doubt will be the most significant affair for traders and they will try to benchmark every component of this report. The forecast is for 192K which is a much lower revised number in contrast to the previous reading of 292K. The Average hourly number is expected to tick higher and the forecast is for 0.3%, while the unemployment rate is expected to remain pat at 5.0%.
The below chart shows the odds for the Fed rate hike during their next meeting have dropped substantially and the chances are only 12% for any rate hike during the Month of March.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam