Lacklustre NFP Russian Sanctions Fed Powell up next

From almost all angles this was a weakish non-farm payroll. The number of jobs created in March was as disappointing as the number created in February was impressive. Just 103,000 jobs were created in March, almost half the 185,000 expected and significantly south of the 313,000 created in February. 

Unemployment remained constant at 4.1% rather than falling to 4% as forecast and average earnings ticked higher to 2.7%, up from 2.7% in February.

The focus of this report is all about the reaction that the Fed is likely to have on the back of it and the Fed are very unlikely to be thrown off course by a wobble in the numbers of one month. 

This is even more true given that the Fed are not expected to hike until June, which still leaves another two jobs reports prior to the June FOMC meeting. 

Overall the Fed will not spend too much time dwelling on this report, there wasn’t much job creation but there wasn’t much job loss either, it was sufficient for the Fed to continue with the slowly, slowly, steady as you go approach.

Even as Fed Chairman Powell speaks this evening we are not expecting too much from him if anything at all on this one report, he will most likely continue with rhetoric that the economy remains strong, although he could sound slightly more cautious given the global trade situation.

Market reaction

US dollar was broadly lower following the jobs report, trading 0.3% lower verses a basket of currencies as it heads towards 90.00. GBP/USD has charged higher on the weaker dollar, pulling $1.41 into target and the EUR/USD has jumped 0.2% higher heading towards $1.23.

Russian sanctions add to risk off vibe

The decline in the dollar has been exasperated by the unfolding political drama, which has been occurring in parallel to the lacklustre non-farm payroll report. 

Around the release of the NFP the US also announced sanctions on Russian oligarchs in the latest effort to punish Vladimir Putin. 

This comes to a backdrop of increased trade tensions between the US and China, after Trump announced another possible $100 billion in trade tariffs on Chinese imports, all in all providing investors few reasons to want to buy into the buck.

As a result of the political turmoil the risk off trade is back on, with flows into safe havens in favour, whilst investors sell out of riskier assets. 

US stock markets are trading around 0.9% lower, whilst gold has push 0.6% higher and flows into the safe haven Japanese Yen have also increased.