Hussein Sayed, Chief Market Strategist at Exinity Group.
The US non-farm payrolls report is always an important data point on the risk event calendar. The release comes on the first Friday of every month at 08.30EST and has generally set the tone for the markets in the following few weeks. The June report looks to be no exception with some commentators calling it a “Goldilocks” moment for markets – not too hot, not too cold.
The headline non-farm payrolls number came in above expectations, printing a very solid 850,000 new jobs versus analyst expectations of 725,000. This came on the back of two disappointing previous reports which averaged 431,000 and leaves the number of US jobs still some 6.76 million below the level in February 2020 before the pandemic began. Progress in job generation remains soft compared to high labor demand, but jobs growth is rising and is forecast to continue as jobless benefits are switched off and lowered.
Notably, the unemployment rate picked up and was higher than expected printing at 5.9 percent. Some economists believe this is merely a question of technicalities as it is simply a sign that people are returning to the labor force alongside the end of the extraordinary stimulus cheques. Indeed, they are expecting to see some massive gains in the headline prints in the July jobs report.
In any event, the most recent labour data pointed to the US Federal Reserve standing aside with regard to monetary policy adjustment. The “goldilocks” moment means the Federal Open Market Committee won’t be tempted to rein in stimulus just yet, with the divergence between the two main gauges of the labor market easing the pressure on the Fed to act swiftly. We shall be watching the summer reports with some interest on any outsized job gains forcing the central bank’s hands to proceed faster in normalizing policy.
While OPEC+ uncertainty has brought volatility to the oil market, the US dollar has seen safe haven demand with rising concerns about a slowdown in economic data and the global recovery story. This is perhaps best summed up by the Citigroup US economic surprise index, which after more than a year of being constantly in positive territory, has recently lapsed back to zero.
This environment has also seen gold move off its recent lows above $1,750 with the precious metal enjoying a positive correlation with stock market volatility. Central bank buying has picked up over the last few months as officials see the yellow metal as an alternative to the US dollar. In addition, with interest rates at such low levels with the Fed in no rush to take action, and real rates which account for inflation falling again, the opportunity costs of holding gold are almost non-existent.
Hussein Sayed, Chief Market Strategist at Exinity Group.
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Fed won’t be tempted to rein in stimulus yet, but worries persist
The headline non-farm payrolls number came in above expectations, printing a very solid 850,000 new jobs versus analyst expectations of 725,000
Hussein Sayed, Chief Market Strategist at Exinity Group.
The US non-farm payrolls report is always an important data point on the risk event calendar. The release comes on the first Friday of every month at 08.30EST and has generally set the tone for the markets in the following few weeks. The June report looks to be no exception with some commentators calling it a “Goldilocks” moment for markets – not too hot, not too cold.
The headline non-farm payrolls number came in above expectations, printing a very solid 850,000 new jobs versus analyst expectations of 725,000. This came on the back of two disappointing previous reports which averaged 431,000 and leaves the number of US jobs still some 6.76 million below the level in February 2020 before the pandemic began. Progress in job generation remains soft compared to high labor demand, but jobs growth is rising and is forecast to continue as jobless benefits are switched off and lowered.
Notably, the unemployment rate picked up and was higher than expected printing at 5.9 percent. Some economists believe this is merely a question of technicalities as it is simply a sign that people are returning to the labor force alongside the end of the extraordinary stimulus cheques. Indeed, they are expecting to see some massive gains in the headline prints in the July jobs report.
In any event, the most recent labour data pointed to the US Federal Reserve standing aside with regard to monetary policy adjustment. The “goldilocks” moment means the Federal Open Market Committee won’t be tempted to rein in stimulus just yet, with the divergence between the two main gauges of the labor market easing the pressure on the Fed to act swiftly. We shall be watching the summer reports with some interest on any outsized job gains forcing the central bank’s hands to proceed faster in normalizing policy.
While OPEC+ uncertainty has brought volatility to the oil market, the US dollar has seen safe haven demand with rising concerns about a slowdown in economic data and the global recovery story. This is perhaps best summed up by the Citigroup US economic surprise index, which after more than a year of being constantly in positive territory, has recently lapsed back to zero.
This environment has also seen gold move off its recent lows above $1,750 with the precious metal enjoying a positive correlation with stock market volatility. Central bank buying has picked up over the last few months as officials see the yellow metal as an alternative to the US dollar. In addition, with interest rates at such low levels with the Fed in no rush to take action, and real rates which account for inflation falling again, the opportunity costs of holding gold are almost non-existent.
Hussein Sayed, Chief Market Strategist at Exinity Group.
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