The non-farm payroll report saw 263k jobs created in April, smashing expectations of 190k. The unemployment rate unexpectedly declined to a 49 year low of 3.6%, the lowest since 1966, down from 3.8%. Yet wages came in slightly soft, growing 0.2% or 3.2% year on year, below the 3.3% expected.
This is another Goldilocks report; a stellar headline number, with wages not quite hitting the mark. This is a report which shows that the US economy is not overheating but that the bond market was premature in pricing in an interest rate cut later in the year. This NFP report shows that the Jerome Powell’ stance is spot on – US economic growth is strong but inflationary pressures are just a little softer, it supports the Fed’s current stance of keeping its finger on the pause button. The Fed’s unwillingness to cut interest rates has been justified. Yet at the same time the increase in wages is encouraging.
The markets reaction was, like last month, rather unremarkable. The dollar reached session highs but has since eased back, whilst the S&P hovered around record highs. The market’s muted reaction is because the NFP shows that the US economy remains on a steady trajectory and that is being efficiently priced int the market.
GBP/USD retakes $1.30
GBP/USD is recovering post NFP after hitting a nadir of $1.2990. Theresa May and the Conservatives had a very difficult night in the local elections as the public vented their frustrations over Brexit on the ballot papers. As a result, the Conservatives (and Labour) lost hundreds of seats at local level. Theresa May’s position looks as shaky as it ever, which had sent the pound lower earlier in the session. The dollar easing off session highs is helping to lift the pound back over $1.30. Pound traders are looking towards cross party Brexit talks for clues.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.