Last Friday US non-farm payrolls for March rose by only 98K, which was far below expectations of 180K, marking the lowest growth since May 2016. In addition, the previous figure was revised downwardly from 235K to 219K. The average hourly earnings also underperformed, falling by 0.1% to 2.7% in March, from 2.8% in February.
However, the unemployment rate for March fell to 4.5%, better than expectations of 4.7%, marking the lowest level since July 2007. Initially, the dollar index fell from 100.70 to 100.39 due to the underperforming non-farm payrolls. Dramatically, it was followed by a sharp reversal, lifted by the outperforming unemployment rate, hitting a 3-and-a-half-week high of 101.17.
The strengthening of USD weighed on gold prices. Spot gold fell by nearly 200 points last Friday, from a 5-month high of 1270.51. This morning, the dollar index hit the highest level of 101.24 since March 15.
Fed Chair Yellen will make a speech at 21:10 BST this evening at the University of Michigan. Be aware that her comments may give further clues about a rate hike in June and the shrinking of the Fed’s balance sheet. Per the CME’s FedWatch tool the latest probability of a rate hike in June has increased to 67.2%.
GBP/USD fell to a 2-and-a-half week low of 1.2358 last Friday because of the soft UK manufacturing data (Feb), BoE President Carney’s comment and the strengthening of USD. Carney stated that “the Brexit negotiation would influence bank regulations and cooperation. The transition period poses a risk to the stability of financial system. The global financial system is at a “fork in the road” going into the Brexit talks”.
Tuesday April 11, at 09:30 BST, will see the release of a series of UK inflation data for March, including CPI, core CPI, PPI and core PPI. It will likely cause volatility for GBP and GBP crosses.
Trump has condemned China for the theft of millions of US manufacturing jobs resulting in the shutdown of numerous US factories. The Trump-Xi meeting ended last Friday symbolising the start of a new bilateral relationship. The result was in line with Xi’s goal of cooperation for mutual benefits.
China will likely make a large amount of investment in the US which will create around 700,000 jobs, by placing an order to purchase Boeing airplanes, and opening of automotive, agriculture and consumer markets to US companies.