Previous Story
Dismal NFP data minimise rate hike forecasts
The number of new employments in the U.S. during May plunged to its lowest level of the last five years and reminded the markets of of weaknesses still present and that that the economy is still in a recovery mode.
The release of May’s Nonfarm Payrolls (NFP) data by the U.S. Department of Labour on Friday revealed that new jobs were only 38,000,less than a third of the previous month’s NFP data. The last time the NFP number was lower than May’s data was back in September 2010.
The same U.S. governmental unit also conducted a separate household survey which showed that the unemployment rate fell in May to 4.7% in relation to April’s 5%. And although at first glance the dismal NFP data are in sharp contrast with the improved unemployment rate, some analysts estimate that it might be due to U.S. citizens not counted as employment force but not being included in parallel as unemployed and hence the disagreement in the two statistical estimates.
According to official comments, the strikes of Verizon’s employees weighed on the labour market’s growth by 35,000 jobs. The people on strike were counted by the Department of Labour during the preparation of the NFP data as unemployed. But even if they were included as employed, the NFP data would show an increase of only 73,000 which would be still be less than 60% of April’s increase in labour force. Production of goods sector was also decreased in May by 36,000.
There were recent signals by Federal Reserve (Fed) officials, including its President Janet Yellen, that a rate increase in coming months was being under serious consideration. But the likelihood of a rate increase during this month does not appear to be high, and even the chances of a rate hike in July have possibly been reduced.
The release of the NFP report was followed by a noteworthy decrease of the U.S. dollar. The EUR/USD on Friday jumped by 1.9% and reached a three week high of 1.13658. On a weekly basis, the world’s most popular currency increased by 2.3%. The USD/JPY on the same day dived by 2.2%.
Fed Board of Governors’ member Lael Brainard implied that the NFP data were average and through her comments she hinted that she might not be voting for an interest rate increase during this month. She also expressed her concerns on the like likelihood of a Brexit on 23 June when the referendum takes place in the UK, and the unfavourable impact that this could have both on the U.S. economy and the global markets.
European Central Bank (ECB) President Mario Draghi is expected to speak during the Brussels Economic Forum on Thursday 09 June and while interest rates have remained unchanged, any comments of additional monetary stimulus by the ECB might reverse the recent upwards trend of the EUR/USD.
The post Dismal NFP data minimise rate hike forecasts appeared first on Forex.Info.
