NEWS AND ANALYSIS

Incisive market commentary and expert opinion

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'>(235)</span>2017 (235)
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)
Collapse August <span class='blogcount'>(52)</span>August (52)
Video Update: Yellen’s speech sparks USD rally
31 Aug 2016
AM Bulletin: US dollar holds recent gains
31 Aug 2016
PM Bulletin: What next for the dollar?
30 Aug 2016
AM Bulletin: Investors revel in Fed’s “Goldilocks” worldview
30 Aug 2016
PM Bulletin: Yellen has spoken
26 Aug 2016
AM Bulletin: All eyes on Yellen
26 Aug 2016
PM Bulletin: BREXIT - THE NEXT CHAPTER The referendum and market reaction
25 Aug 2016
Holiday Schedule: Summer Bank Holiday
25 Aug 2016
AM Bulletin: Quiet start ahead of US Durable Goods/Jackson Hole
25 Aug 2016
Video Update: Look–ahead to Janet Yellen’s speech at Jackson Hole
24 Aug 2016
AM Bulletin: Investors edgy ahead of Yellen’s Jackson Hole speech
24 Aug 2016
PM Bulletin: Crude continues to slide
23 Aug 2016
Platform Tour: CFD Trading - How to Place a Trade
23 Aug 2016
AM Bulletin: Crude slide shrugged off by equities
23 Aug 2016
Trading Guides: How fast can you buy and sell with spread betting?
22 Aug 2016
Weekly Bulletin: Jackson Hole Symposium in focus
22 Aug 2016
PM Bulletin: Retailers bring earnings season towards a close
19 Aug 2016
AM Bulletin: Equities driven by oil and the Fed
19 Aug 2016
Video Update: The next Fed rate hike, the dollar and oil
18 Aug 2016
AM Bulletin: FOMC minutes read as dovish
18 Aug 2016
Trading Guide: How to choose a spread bet provider
17 Aug 2016
AM Bulletin: UK employment data and FOMC minutes in focus
17 Aug 2016
PM Bulletin: Dollar sell-off sends USDJPY below 100
16 Aug 2016
AM Bulletin: Yen stronger as investors de-risk
16 Aug 2016
Platform Tours: CFD Trading - How to Place Orders
15 Aug 2016
Trading Guides: What is spread betting?
15 Aug 2016
Weekly Bulletin: Summer “melt-up” continues
15 Aug 2016
PM Bulletin: Dow, S&P and NASDAQ hit all-time highs
12 Aug 2016
AM Bulletin: US indices hit fresh all-time highs
12 Aug 2016
PM Bulletin: Yen still strong, despite Japan’s stimulus
11 Aug 2016
AM Bulletin: Equities following oil
11 Aug 2016
PM Bulletin: Gold back within sight of multi-year highs
10 Aug 2016
AM Bulletin: US Crude Oil inventories eyed
10 Aug 2016
PM Bulletin: Sterling under pressure
09 Aug 2016
AM Bulletin: Stock markets calmer following last week’s rally
09 Aug 2016
Platform Tours: Spread Betting - How to Place a Trade
08 Aug 2016
Platform Tours: Spread Betting - Closure and Partial Closure
08 Aug 2016
Platform Tours: Spread Betting - Check Open P & L
08 Aug 2016
PM Bulletin: FTSE 100 chart
08 Aug 2016
Weekly Bulletin: US Fed: the last hawk standing
08 Aug 2016
PM Bulletin: Non-Farm Payrolls soar
05 Aug 2016
July: Non Farm Payrolls Out Today
05 Aug 2016
AM Bulletin: BoE adds stimulus; Payroll numbers in focus
05 Aug 2016
PM Bulletin: Non-Farm Payroll look-ahead
04 Aug 2016
AM Bulletin: BoE rate decision in focus
04 Aug 2016
PM Bulletin: BoE look-ahead
03 Aug 2016
AM Bulletin: Earnings and Services PMIs in focus
03 Aug 2016
PM Bulletin: JPY rallies on stimulus disappointment
02 Aug 2016
AM Bulletin: JPY strengthens as Abe disappoints
02 Aug 2016
CFD Trading - Closure and Partial Closure
01 Aug 2016
Doubts over European stress tests
01 Aug 2016
Monetary policy driving investor behaviour
01 Aug 2016
Expand July <span class='blogcount'>(38)</span>July (38)
Expand June <span class='blogcount'>(42)</span>June (42)
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)
 
 
 Thursday 04 August 2016

PM Bulletin: Non-Farm Payroll look-ahead

 

 

Markets are busy absorbing the news of the Bank of England’s (BoE) rate cut and the boost to its Asset Purchase Facility announced earlier today. Chiefly the adjustment came in sterling although the FTSE100 rallied on the news.  Cable fell sharply towards the 1.3100 level and EURGBP rose towards 0.8500 before later drifting back. There had been a widespread expectation that the BoE would cut its headline Bank rate by 25 basis points. However, not everyone had anticipated an increase in quantitative easing (let alone the inclusion of corporate bonds into the mix) and this is chiefly what sent sterling lower. But the BoE also released its Quarterly Inflation Report and downgraded its outlook for UK growth in the biggest revision since 1993. It now predicts a cumulative 2.5% reduction in growth over the next 3 years. Despite all this it’s worth noting that the British pound traded comfortably above its post-Brexit lows.

In terms of economic events the focus now switches to tomorrow’s US Non-Farm Payroll (NFP) report. This is one of the most important of all data releases as it gives an update on the jobs situation in the world’s most important economy.  Maximising employment, along with maintaining stable prices, is the Federal Reserve’s dual mandate. The Fed is also charged with ensuring moderate long-term interest rates, but that’s open to some interpretation. The notion of “full employment” or the “natural rate of unemployment” is also open to interpretation but is generally thought to be somewhere between 4.7% and 5.8%. In June it came in at 4.9%, ticking up from 4.7% the month before. By this measure, the US Federal Reserve should have already pulled the rate hike trigger.

The expectation is that we’ll see an increase in payrolls of around 180,000 in July. If so, this would be just a tad under the six month average of 182,000. The Unemployment Rate is expected to drop back to 4.8%. In some ways it’s difficult to assess how a good or bad number tomorrow is likely to affect the markets. This is because the next FOMC meeting doesn’t take place until 20th/21st September and we’ll have a stack of fresh data releases to consider, including another payroll report, before that big meeting (which includes the Fed’s quarterly Summary of Economic Projections) takes place. On top of this, a fair number of commentators are convinced that the Federal Reserve won’t want to make any changes to monetary policy ahead of the US Presidential Election which takes place in November. That’s just one of the reasons that the fed funds futures market assigns little prospect to a rate cut until December at the earliest.

Despite all this tomorrow’s number still has the potential to be market-moving. Bear in mind that the last two releases both missed expectations to an extraordinary degree. This can be seen by looking at the last two blue bars in the chart below (courtesy of forexfactory) and comparing them to the consensus market expectations which are shown by the yellow bands.

pm

As we can see, last month’s number (for June) came in well above expectations (287k versus 175k) while May undershot by a similar degree (38k versus 159k).  So, it’s only sensible to consider the possibility of another big surprise.

While the fed funds futures aren’t pricing in any likelihood of a rate hike next month, that doesn’t mean other markets won’t. Bear in mind that since July’s FOMC meeting where the committee decided yet again to keep rates on hold, we’ve had a string of Federal Reserve members pop up to persuade us that the September meeting is still “live”. Personally, I think they’re talking twaddle, but they obviously believe that talking up the US economy is part of their job spec.

So, my take is that (revisions aside) a poor number (140,000 or below) will persuade investors that there will be no rate hike in September. The dollar should fall and precious metals rally. A good number (200,000 plus) keeps alive the prospect of a hike next month. This would be dollar-positive and bad for precious metals. US stock indices could do anything. But whatever the number, it will quickly be forgotten as traders look forward to the next big release.

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

Tagged: Bulletin PM

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.