CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Not too hot not too cold jobs data just right for March

Article By: ,  Financial Analyst
March 10, 2017 2:21 PM

The market has reacted to the February jobs report, the 235k increase in Non-Farm payrolls, the drop in the unemployment rate to 4.7% and the 2.8% annual increase in wages is good for stock markets, but not so good to drive the dollar or US Treasury yields higher.

Rate hike in June now not so certain…

While this jobs data is solid enough to sign, seal and almost delver a rate hike from the Fed next Wednesday, it is not too hot to force the Fed to embark on more than three rate hikes this year, which is what the market expects. In fact, since the release of the February jobs data market expectations of a US rate hike next week (according to the Fed Fund Futures market) have retreated a tad, down to 98% from 100%. Also, we haven’t seen any major increase in expectations for a June rate hike; the market is currently expecting an even chance of a subsequent hike in three months’ time.

Wage data holds the key to future Fed moves

Overall, wage data is key and although it has been trending higher since reaching a cyclical low in 2012, it remains below the 3.6% peak reached in 2007. Thus, if decent jobs growth and signs of labour shortages being reported by business to the Fed’s Beige Book, can’t trigger wage growth of more than 2.8%, the market is taking the view that sclerotic wages are here to stay. But is this the correct view to take?

Yellen will determine if the stock market rally will continue

As mentioned above this report has been good news for stocks, but not so good for the dollar and US Treasury yields, and at the time of writing the 2-year yield is heading back to key support at 1.35%. Whether or not stocks continue to move higher will depend on Yellen’s press conference on Wednesday night. If she does sound a note of caution about sluggish wage growth then we could see a continuation of Friday’s moves, however, if she takes the view that wage growth is a lagging indicator, which it is, and that wages could continue to push higher in the coming months, then it may be a reversal of fortunes, with stocks coming under pressure, and the dollar and Treasury yields recovering.

As we end of this week, the market is convinced of a March rate hike, investors are on the fence about a hike in June, and we expect directionless markets in the first half of next week, as we wait for comments from Yellen on the future path of US rates, which is likely to be the key theme for markets for some weeks to come.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024