NEWS AND ANALYSIS

Incisive market commentary from David Morrison

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
 
+ Show blog menu

Categories

Menu

Expand 2017 <span class='blogcount'>(342)</span>2017 (342)
Collapse 2016 <span class='blogcount'>(483)</span>2016 (483)
Expand December <span class='blogcount'>(23)</span>December (23)
Expand November <span class='blogcount'>(41)</span>November (41)
Expand October <span class='blogcount'>(37)</span>October (37)
Expand September <span class='blogcount'>(41)</span>September (41)
Expand August <span class='blogcount'>(52)</span>August (52)
Expand July <span class='blogcount'>(38)</span>July (38)
Collapse June <span class='blogcount'>(42)</span>June (42)
AM Bulletin: Markets rise for the second day ; back to pre-referendum levels, sterling still weak
30 Jun 2016
AM Bulletin: Confidence returns – but for how long?
29 Jun 2016
AM Bulletin: The onslaught continues – and we’re not just talking the football
28 Jun 2016
Weekly Bulletin: Investors rattled by Brexit vote
27 Jun 2016
PM Bulletin: Brexit - Referendum fallout
24 Jun 2016
AM Bulletin: We’re out! And so is Cameron
24 Jun 2016
Video Update: #AskSpreadCo - EU referendum
23 Jun 2016
AM Bulletin: Markets on tenterhooks ahead of UK vote
23 Jun 2016
Spread Betting Tips
22 Jun 2016
AM Bulletin: Risk assets waft higher
22 Jun 2016
PM Bulletin:Referendum and Market Reaction
21 Jun 2016
PM Bulletin: Gold and the referendum
21 Jun 2016
AM Bulletin: Yellen testimony in focus
21 Jun 2016
PM Bulletin: Janet Yellen’s testimony
20 Jun 2016
Weekly Bulletin: It’s all about the referendum
20 Jun 2016
Market Info Update: EU Referendum Margin Changes - CFDs
17 Jun 2016
Market Info Update: EU Referendum Margin Changes - Spread Betting
17 Jun 2016
PM Bulletin: Forecasting the referendum result
17 Jun 2016
AM Bulletin: Central banks leave rates unchanged
17 Jun 2016
PM Bulletin: FOMC post-mortem
16 Jun 2016
AM Bulletin: Yen, precious metals soar post FOMC/BOJ
16 Jun 2016
PM Bulletin: FOMC look-ahead
15 Jun 2016
AM Bulletin: FOMC meeting ahead
15 Jun 2016
PM Bulletin: European equities slide
14 Jun 2016
AM Bulletin: Stocks down on oil, growth fears and UK referendum
14 Jun 2016
Weekly Bulletin: FOMC and BOJ meetings in focus
13 Jun 2016
PM Bulletin: Markets rattled by slide in bond yields
10 Jun 2016
AM Bulletin: European stock indices drift lower
10 Jun 2016
PM Bulletin: WTI at $50 – thoughts on US production
09 Jun 2016
AM Bulletin: Precious metals soar
09 Jun 2016
PM Bulletin: S&P closes in on all-time high
08 Jun 2016
AM Bulletin: Investors in limbo ahead of Fed and UK vote
08 Jun 2016
PM Bulletin: Yellen and the jobs data
07 Jun 2016
PM Bulletin: Fresh polls send sterling lower
06 Jun 2016
Weekly Bulletin: Rate hike? What rate hike?
06 Jun 2016
PM Bulletin: A dismal Non-Farm Payroll number
03 Jun 2016
AM Bulletin: Non-Farm Payroll Friday
03 Jun 2016
PM Bulletin: Non-Farm Payrolls look-ahead
02 Jun 2016
AM Bulletin: OPEC, ECB, key data releases and central bank speakers
02 Jun 2016
PM Bulletin: OPEC and the oil price
01 Jun 2016
AM Bulletin: Manufacturing PMIs in focus
01 Jun 2016
Expand May <span class='blogcount'>(42)</span>May (42)
Expand April <span class='blogcount'>(45)</span>April (45)
Expand March <span class='blogcount'>(41)</span>March (41)
Expand February <span class='blogcount'>(42)</span>February (42)
Expand January <span class='blogcount'>(39)</span>January (39)
 
 
 

 

The title of this piece is a direct copy of last month’s post-payroll release. But perhaps it doesn’t go far enough. Today’s payroll report wasn’t just dismal- it was disastrous.
  
The headline number showed an increase of just 38,000 jobs. This was on expectations of 160,000 additions. So that’s a miss of over 120,000 which was close to three times worse than last month’s miss. The number was so bad that even with the Unemployment Rate dropping to 4.7% it now looks very unlikely that the Fed can justify a rate hike this month, or in July for that matter.  

At least that’s what the market thinks. The dollar slumped on the news while precious metals soared. These moves are entirely consistent with taking the prospect of a summer rate hike off the table.
  
   
USDJPY – 5 min:

   
030615
   
    
Gold – 5 min:
   
030616-2
    
        
The last month has been somewhat bizarre. It became apparent that members of the US Federal Reserve had become very unhappy that the market refused to price in the prospect of a summer rate hike. Consequently, over the past few weeks we saw a confusion of Fed Heads come out to declare that their conditions for monetary tightening were being met. Some were claiming that two, three or even four rate hikes were possible in 2016 – a ludicrous proposition given the few windows available due to the US Presidential Election, let alone the uncertain outlook for the US and global economies. Nevertheless, this hawkish commentary culminated last week with Federal Reserve Chairman Janet Yellen declaring that:   

“It’s appropriate, and I’ve said this in the past I think, for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate."    

This constant barrage of hawkishness pressed the markets to sharply cut the odds on a summer rate hike. This led to a rally in the dollar together with a nasty and protracted sell-off in precious metals. That’s all been reversed now thanks to today’s payroll release.      

On Monday evening (17:30BST) Mrs Yellen is scheduled to speak about the economic outlook and monetary policy at the World Affairs Council in Philadelphia. It will be very interesting to hear what she has to say in the light of the jobs data. Now we can’t blame the Fed for weak data. But we can take them to task for their relentless effort to tell the market it was pricing assets incorrectly. The US Federal Reserve exerts too much influence over the markets these days and many investors will now believe that the Fed has taken them for a ride. Mrs Yellen is going to find it very difficult to winch back credibility for the central bank now.      

David: "It became apparent that members of the US Federal Reserve had become very unhappy that the market refused to price in the prospect of a summer rate hike."
 
 
Disclaimer:
​    

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Category: PM Bulletin


Add a comment Add comment            

 

 
© 2017 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.