Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

NFP No Fed/USD Game-Changer

Published 03/11/2018, 12:09 AM
Updated 07/09/2023, 06:31 AM

US Avg Hourly Earnings Y-Y

Jobs no FX Game-Changer

Today’s release of the US February jobs report may be exactly what stocks bulls wanted in the way of goldilocks economic growth. Steady tightening in labour markets without inflationary growth in pay growth. The 313,000 increase in non-farm payrolls was the highest since July 2016, the unemployment rate held at 4.1% for the fifth consecutive month, while average hourly earnings growth eased to 2.6% y/y from the market-shaking 2.9% --which was revised down to 2.8%.

No game-changer for the Fed

  • It may be too early to write about this month’s FOMC meeting, which carries a 100% chance of a 25-bp rate hike in the Fed Funds rate target. But the more important question is will the Fed’s dot plot shift members’ views in favour of four Fed hikes for the year from the current three hikes. Today’s earnings data suggests that will not be the case.

Recall that the 2.9% y/y rise seen in the January earnings was emerged with scepticism due to weather-induced decline in average weekly hours. The subsequent pullback to 2.6%, coupled with the fact that the Fed’s inflation target remains at 1.5% does not call for an upgrade in the pace of Fed tightening.

No game-changer for USD

Since FX markets run on expectations, nothing in today’s jobs report or recent US data provide traders to alter their outlook based on faster Fed tightening. Thursday’s ECB press conference highlighted how the central bank faces increasing difficulty at convincing the world that plenty of accommodation remains. In contrast, Fed hawks are at difficulty in justifying faster tightening at a time when the ascent in earnings may reflect a possible end-of cycle phenomenon – a lagging indicator in labour markets.

Today’s report is a fresh confirmation of the status quo (3 Fed hikes in 2018) instead of increasing the odds of a 4th rate hike. With core PCE steady at 1.5% and ascending bond yields looming large over an aggressive Treasury borrowing schedule, it best to not rock the boat. EUR/USD remains closer to $1.35 than it is to $1.15.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.