Once again, the indications given by the ADP report were far from being accurate. The latest growth numbers for the US job market just came in stronger than expected with 390 thousand new jobs created in May. The NFP number was slightly weaker than in April but doesn’t really point to significant cooling in the job market
While the growth rate came in as a positive surprise the fact that the average hourly earnings on yearly basis didn’t change that much (5.2% vs 5.2% estimate, previous 5.5%) indicates the inflation doesn’t have a strong earnings component to it, at least not yet. One data point doesn’t create a trend but this could point to inflation slowing down. The participation rate was confirmed at 62.3% (vs 62.2% last month) while the unemployment rate remained unchanged at 3.6% (3.5% estimate, 3.6% previous).
All in all, the case for the Fed to raise rates is not threatened by this report. No strong indications of the economy losing momentum substantially but still some signs of both the job market and inflation cooling off a little. At the time of writing this Fed Funds futures traders price in a 100% probability for the Fed to hike the interest rate by 25 basis points in the June meeting and the same probability for another 0.25% rate hike in July.
The initial reaction was the dollar bullish (+0.20%) with stocks drifting lower (DJ -0.35%) and gold (-0.30%) and T-Bonds slipping too. The moves have been muted and therefore the longer-term trends in the key markets stayed intact.
Chief Market Analyst
DISCLAIMER TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyzes and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval. FX and CFDs are leveraged products. They are not suitable for every investor, as they carry a high risk of losing your capital. Please ensure you fully understand the risks involved. All the prices in this report are CFD prices based on price charts provided by TIOmarkets unless otherwise stated.