Markets decline following NFP report

The financial markets concluded trading for another week staring at losses after an uninspiring jobs report from the United States encouraged further concerns over the global economy. The US economy created just over 150,000 jobs in January, which is quite far away from the expectations just below 200,000 and this was enough to alert onlookers and encourage investors to price in further declines into the equity markets.

The headline number of jobs created by the United States over the previous month was not strong enough to encourage optimism over the US economy and this unexpectedly weak headline number compliments recent data that has suggested US economic momentum is also slowing down. Markets were already being repeatedly pressured by concerns over slowing global growth, depression in the oil markets and unease over how slowing growth in China might impact the global economy and when you also consider the timing of an unexpectedly weak jobs report from the United States, it can then be explained why the markets as a whole reacted negatively to the NFP release.

Where does the NFP leave the Fed?

The uninspiring headline number of jobs created by the United States economy over the previous month has hardly encouraged optimism that the Federal Reserve will be comfortable raising interest rates once again in March. If anything, the unexpectedly weak headline number has complimented ongoing suspicions that US economic data is slowing down with this being a major reason behind why expectations in the Fed Funds Futures market have plunged in recent weeks.  


Gold has benefited hugely from the crumbling expectations over the Federal Reserve raising interest rates in 2016 with the yellow metal managing to jump to fresh three-month highs at $1174. USD weakness has helped encourage gains for Gold, but the metal has also benefited from an investor scramble for safe-haven assets as the markets continue to be alarmed by fears over slowing global growth and depression in the oil markets. Since the beginning of February the price of Gold has increased by nearly $60 from $1115 and I think that the metal might face profit-taking or meet sellers around the $1180 zone.

WTI Oil & Saudi/Venezuela meeting

WTI Oil concluded trading for last week by looking very close to slipping back below $30, which would have likely correlated into further pressure on the global equity markets. News over the weekend has emerged that the Saudi Arabian and Venezuelan oil ministers have held successful meetings over how to stabilize the crude market, which might once again raise optimism over a possible production cut.

Although headlines over a possible production cut are becoming regular occurrences in the news, I remain hesitant towards believing such a scenario because it would be very difficult to carry out. There are so many different producers of oil around the world that any production cut would have to be collaborated and respected globally, and I would be concerned that a production cut among just OPEC members would not be enough to encourage a rebound in the oil markets. 

GBPUSD correction looks to have finished

After benefiting from USD weakness across the currency markets last week, it looks like the correction in the GBPUSD might have concluded. The GBPUSD managed to rebound from 1.42 to 1.46 over the first trading week in February, but the failure of the currency pair to maintain itself above 1.46 has encouraged sellers to reappear. There are still concerns about slowing economic momentum in the United Kingdom, while ongoing uncertainty over whether there will be a Brexit referendum to vote on UK membership into the EU should continue to haunt investor attraction towards the Pound.

Overall, the failure of the GBPUSD to close above 1.46 last week has left the currency pair vulnerable to returning to 1.44. I also think that the GBPUSD might be left open to returning to 1.42, and even possibly the milestone six-year lows at 1.40.

EURUSD at threat to meeting sellers

While the GBPUSD might have failed to close above the psychological 1.46 area last week one other currency pair that did manage to close above its own psychological level was the EURUSD at 1.10, and this has paved the way for the Eurodollar to continue progressing. Since closing above 1.10 late last week, the EURUSD has managed to hit three-month highs at 1.12. With the prospects being strong that the European Central Bank (ECB) will continue to threaten further monetary easing, we believe the chances are high that the EURUSD will now meet sellers and begin retreating back towards 1.10.  


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