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Jobs no FX Game-Changer

By Ashraf Laidi  |  09/03/2018 16:42
Jobs no FX Game-Changer

Today’s release of the US February jobs report may be exactly what stocks bulls wanted in the way of goldilocks economic growth. Steady tightening in labour markets without inflationary growth in pay growth. The 313,000 increase in non-farm payrolls was the highest since July 2016, the unemployment rate held at 4.1% for the fifth consecutive month, while average hourly earnings growth eased to 2.6% y/y from the market-shaking 2.9% --which was revised down to 2.8%. 

No game-changer for the Fed
  • It may be too early to write about this month’s FOMC meeting, which carries a 100% chance of a 25-bp rate hike in the Fed Funds rate target. But the more important question is will the Fed’s dot plot shift members’ views in favour of four Fed hikes for the year from the current three hikes. Today’s earnings data suggests that will not be the case.
Recall that the 2.9% y/y rise seen in the January earnings was emerged with scepticism due to weather-induced decline in average weekly hours. The subsequent pullback to 2.6%, coupled with the fact that the Fed’s inflation target remains at 1.5% does not call for an upgrade in the pace of Fed tightening.

No game-changer for USD

Since FX markets run on expectations, nothing in today’s jobs report or recent US data provide traders to alter their outlook based on faster Fed tightening. Thursday’s ECB press conference highlighted how the central bank faces increasing difficulty at convincing the world that plenty of accommodation remains. In contrast, Fed hawks are at difficulty in justifying faster tightening at a time when the ascent in earnings may reflect a possible end-of cycle phenomenon – a lagging indicator in labour markets.

Today’s report is a fresh confirmation of the status quo (3 Fed hikes in 2018) instead of increasing the odds of a 4th rate hike. With core PCE steady at 1.5% and ascending bond yields looming large over an aggressive Treasury borrowing schedule, it best to not rock the boat. EUR/USD remains closer to $1.35 than it is to $1.15.
Any information, analysis, opinion, commentary or research-based material on this page is for information purposes only and is not, in any circumstances, intended to be an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any person acting on it does so entirely at their own risk and GKFX accepts no responsibility for any adverse trading decisions. You should seek independent advice if you do not understand the associated risks.


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  • The Loonie's at it Again
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The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.

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