NFP data fail to meet forecasts

The U.S. labour market failed to continue with its past strong performances as there were only 160,000 new job fillings during April according to Friday’s Nonfarm Payrolls (NFP) data. The result was not competitive compared to the previous month’s number of 208,000, while there were expectations for at least 200,000 new jobs. The U.S. Department of Labour, responsible for the preparation and release of the monthly NFP reports, has adjusted the February and March results from 215,000 to 208,000 and from 242,000 to 233,000 respectively.

Additional data from the same source revealed that the Unemployment Rate for April remained unchanged at 5%, while the Average Hourly Earnings for the same month increased by 2.5% compared to previous month’s 2.3%. The NFP report showed that the business and healthcare sectors produced most of the new job openings, by employing in April 66,000 and 43,000 staff respectively. On the contrary, the energy sector had the weakest performance in terms of new staff recruits due to the continuously decreasing of crude oil prices.

The U.S. employment levels and inflation are known for their ability to influence decisions taken by the Federal Reserve (Fed), including interest rate adjustments. The next Federal Open Market Committee (FOMC) meeting is scheduled for 14 June and although there are reasonable expectations for the policymakers to decide for an interest rate increase, Friday’s weak NFP data turned many investors from believers into doubters. The one thing keeping some into still expecting an interest rate hike is the wages report which showed an increase, but otherwise there is not much else to support pessimists. In December, the Fed decided to increase interest rates for the first time in a decade while policy makers gave their forecasts for two additional rate hikes within the year.

The EUR/USD on Friday reacted to the NFP data by reaching as high as 1.14793, but despite the high volatility levels that surrounded the timing of the data release, the world’s most popular currency pair posted marginal gains of just 0.3%. On Thursday however, the EUR/USD ended a three-day series of losses as the pair moved downwards by 0.7% to 1.13993. On a weekly basis, it decreased by 0.5%.

Coming up this week, Germany’s Federal Statistical Office and Italy’s National Institute of Statistics are expected to release preliminary results for the two nations’ Gross Domestic Product (GDP) respectively for this year’s first quarter. Given that the Q1 2016 GDP preliminary result for Eurozone was better than expected, there are similar expectations for the German economy. However, there are concerns for the Italian economy. Although business performance is strong together with healthy consumer spending, the banking sector is still under performing and so it will be interesting to see whether Italy’s GDP results will meet forecasts.


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