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| The U.S. employment data contains a surprising figure, and the markets are responding accordingly |
The U.S. employment data contains a surprising figure, and the markets are responding accordingly
Employment data for the US was released and it was higher than expected. This means that the labor market is still strong, and the Federal Reserve will likely increase its monetary policy in the near future.
Today's economic data was mixed, indicating the strength of the labor market with more jobs added but also its weakness due to an increase in unemployment. The markets reacted, with the dollar/gold index rising and gold falling after previously being stable. This news may prompt the Federal Reserve to slow down on monetary tightening.
Employment data
In May, the US economy added 339 thousand jobs, far surpassing the expected 180 thousand. This number is even higher than the previous reading of 294 thousand, which was revised from 253 thousand. The private sector also had a strong month, adding 283 thousand jobs instead of the predicted 160 thousand and surpassing its earlier reading of 253 thousand (previously reported as 230 thousand).
In May, the US unemployment rate rose by 3.7%, higher than the expected 3.5%. Hourly earnings in April rose by 0.3% monthly and 4.3% annually, meeting expectations but lower than the previous reading of 0.4% and 4.4%, respectively.
Markets now
The dollar index increased by 0.05% to 103.55 points, while gold futures dropped 0.2% to $1,991 per ounce. Additionally, spot gold decreased 0.17% to $1,974 per ounce.
The Federal Reserve's recent comments have caused the U.S. dollar to weaken
The value of the US dollar dropped in the early hours of European trading on Friday, following a major decline the day before when Congress approved a debt limit bill. Investors are now waiting for the release of an important report on employment.
The US Dollar Index, which measures the dollar's value against a basket of currencies, was down 0.1% at 03:55 ET (06:55 GMT). On Thursday, it had its worst day in nearly a month & is projected to end the week 0.7% lower - its worst week since mid-January.
The US Senate & House of Representatives have both passed legislation raising the government's debt ceiling to $31.4 trillion, & it is now headed to President Joe Biden to sign into law. If Congress does not act by June 5, the Treasury Department will be unable to pay all of its debts, which would result in the government's first-ever default.
Investors are uncertain about what lies ahead
The dollar was affected by the news, as it had been benefiting from the uncertainty due to its status as a safe-haven asset. Yesterday, one of the Federal Reserve's members indicated that a rate cut may occur at their next meeting, signaling an end to their current interest rate hikes.
The Federal Reserve's announcements shocked the markets
The US jobs report for May is due out Friday, & it's expected to show that the US added 180,000 jobs. The report could influence the Federal Reserve's decision on whether to pause interest rate hikes for 14 months when they meet in June.
The possibility of the Federal Reserve raising interest rates has increased recently, with Philadelphia Fed President Patrick Harker & Federal Reserve Governor Philip Jefferson both endorsing the move. EUR/USD rose 0.1% to 1.0773, reaching a one-week high after European Central Bank President Christine Lagarde's Eurozone inflation report for May was less strong than expected.
We will reduce interest rates in this situation
Christine Lagarde, the head of the European Central Bank, said Thursday that inflation is very high & will remain so for a long time. On Friday, data showed that French industrial production rose by 0.8% in April which was higher than expected. This was an improvement on the previous month's decline of 1.1%, showing that the Eurozone's second largest economy is resilient - something the ECB will take into consideration.
GBP/USD rose 0.1% to 1.2544, USD/JPY increased 0.1% from Thursday's low of 138.44 to 138.88, and AUD/USD also rose 0.1% to 138.88 & 0.6% to 0.6611 respectively . The Australian dollar was lifted due to news that the country's independent wage-setting body will increase the minimum wage by 5.75% as of July 1, increasing inflation concerns prior to the Reserve Bank of Australia meeting next week which is likely sparking predictions for a quarter point rate hike .