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March employment report released on April 6 provided markets with a downward surprise, a surprise that missed expectations by 85K, while the unemployment forecast also disappointed as economists had forecasted a 4.0% figure.

Analysts had anticipated that employment change would stand at 188K but instead a figure of 103K was seen.

The unemployment rate remained unchanged at 4.1%, marking the sixth constant month in a row.

Wages were also steady, printing a 0.3% growth.

Employment rose in manufacturing, health care, and mining.

US Change in Non-farm Payrolls is currently at 103K level, marking the best quarter since the great recession, yet, March jobs numbers disappointed.

The Employment Situation for the month of April is scheduled to be released on Friday, May 4, 2018, at 12:30 p.m. (GMT), and investors are patiently waiting to receive clues and the headline numbers.

But are headline number all that matters? Certainly no.

What to focus in on April’s report…

1. US and EU Interest Rate differentials shift

Since the beginning of April the 10Yr US Yields rose from 2.7298% to a high of 3.0315% yesterday, while short and long-term Treasury Rates narrowed.

With the US Yields rising marking a 4-year high the interest rate differential between the US and EU, since EU rates are steady just below 0.0%, increase the odds to favoring Dollar.

Note rising Yields indicate rising interest rates to curb inflation, hence, investors believe Fed may rise rates four times in 2018.

2. Oil multi year high and inflationary pressures

With Crude Oil prices hitting a fresh record high Fed’s prospects for 2018 policy may be changing sooner than anticipated, a narrative long forgotten since the last FOMC meeting as policy makers signaled that the bar for four hikes is set high, albeit, rates will most likely continue coming gradual.

Consensus does indeed shift as high Oil prices add inflationary pressures, which in turn, rise interest for another hike.

3. Equities and fiscal policy effects

Considering the recent quarter-end in equities and the relationship between company-specific news, macroeconomic events and geopolitical factors, volatility spikes were moving in tandem despite historic irregularities.

With fiscal policy changes supporting economic activity and spending so far, a good jobs growth print may be right in the corner as positive business results increase demand for workers in businesses.

4. Wages expectations grow as economic activity makes case from another hike

Despite the labor market report showed an average hourly earnings figure of 0.3%, as economists expected, hourly wage development over the first quarter rose 2.7%.

The print was the key element of overshadowing the poor March report and increased hopes than Fed may increase the rates another three times this year, not two.

With Yields and inflation rising, as identified above, higher wages certainly add to the consensus.”

Any opinions, news, research, analyses, prices or other information contained here are provided as general market commentary and do not constitute investment advice. FXPRIMUS does not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.


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