US Open Note – Dollar in tears after huge NFP miss; gold, euro soar



Nonfarm payrolls arrive significantly lower; Fed in focus

The US jobs report was the highlight of the day, but the numbers did not come in as investors wished, with US nonfarm payrolls hugely missing the forecast of 978k to clock in at 266k and the unemployment rate disappointingly edging up to 6.1% versus 5.8% expected. March’s employment growth was also notably revised down, raising some doubts about how the hiring process is developing under the reopening phase and a booming economy.

The Bureau of Labor Statistics explained that job gains in leisure and hospitality were partially offset by losses in help services, couriers, and messengers. This is not entirely negative for the US labor market as the reopening phase is likely reducing demand for delivery servives and decreases the number of low-paid, part-time workers who remain on the sidelines, though given the growth euphoria in the US, the data has definitely raised some caution and somewhat justified the Fed’s patience over the increasing calls for monetary tightening.

The Fed’s policy trajectory, however, could remain a question mark to discuss. The Fed is stubbornly opposed to any rate hikes before 2024, but investors believe that the massive monetary and fiscal stimulus may push inflation measures beyond the central bank’s limits, consequently leading to some stimulus reduction perhaps through a pullback in monthly bond purchases in the second half of the year.

Well, probably the Fed may not easily surrender to tightening calls, though discussions around the topic could increasingly pick up in the coming months as some policymakers are already shifting sides and some key central banks have already mapped a route out of theie super-loose policies. Dallas Fed President Steven Kaplan asked for talks on lifting policy accommodation on Thursday, saying the economy “would be much healthier once the Fed reduces bond-buying”. Also, the central bank’s semi-annual financial stability report cautioned about stretched valuations and the exacerbated vulnerabilities in the financial system given the rising appetite for riskier assets.

Dollar, Treasury yields dive; gold prints fresh highs

The negative surprise in the US jobs data was big enough to bite the dollar and send it to an intra-day low of 108.33 against the Japanese yen and straight towards the key supportive trendline. On the other hand, dollar/loonie managed to avoid additional declines as Canadian employment figures also arrived way weaker than analysts estimated, last seen at 1.2174.

The 10-year Treasury yield tumbled to a two-month low of 1.4690% before bouncing back to 1.5430%. Futures tracking the Dow Jones pulled to negative territory, while those for S&P 500 and Nasdaq continued to flash green, with the latter holding up by 1.23% in the day.

Gold extended yesterday’s impressive rebound to a three-month high of $1,843. Copper also came under the spotlight after aggressively running to a fresh record high.

Euro bulls take over

Meanwhile in the Eurozone, the upbeat German industrial and trade figures for March provided a short-lived upside correction in euro/dollar ahead of a quiet week, but the NFP miss brought the bulls back into the game, pushing the pair to a fresh intra-day high of 1.2145. A break above 1.2175 could provide more fuel to the bulls.

Pound holds stable

On the other hand, the pound, which failed to capitalize on the Bank of England’s tightening signals on Thursday, could face a more drastic week if the Scottish parliamentary votes pave the way for a second referendum on a divorse from the post-Brexit UK, snapping a 317-year-old union with the region. The spotlight will also fall to monthly GDP growth figures for March on Wednesday. For now, pound/dollar continues to sideline within the 1.3900 territory.

Pinakabagong Balita


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