NFP: Dollar drops, stocks higher, gold soars, as rate cut bets increase
Fiona Cincotta June 7, 2019 4:28 PM
The weaker than forecast NFP figures added to speculation that the Federal Reserve will cut rates giving equities a injection of life.
European markets were already on a front foot owing to optimism that progress was being made in the trade and immigration talks between US and Mexico. The weaker than forecast NFP figures added to speculation that the Federal Reserve will cut rates giving equities a further injection of life.
Wages lower than expected
With unemployment remaining at 3.6%, we might be tempted to think that headline job creation is weaker due to full employment, however wage growth doesn’t support this story. In the case the full employment we would expect wages to move higher as well. As this isn’t happening the cause for lower job creation appears to be something else, something a little more sinister. Wages disappointed, increasing 0.2%, lower than the 0.3% expected.
Dollar dives 2.5 month low
The market’s reaction is that of a market which is expecting a rate cut imminently. The CME Fed Fund shows the market is now pricing in a 79% probability of a rate hike by July and a 97% probability of a rate rise by September. The dollar dropped to 96.5 versus a basket of currencies, its lowest level in 2 ½ months.
Whilst the start of next week is relatively quiet as far as US economic data is concerned, it picks up in the second half with inflation, retail sales, industrial production and consumer confidence. Any sign of weakness could see the dollar drop toward support at 95.75.
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.