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It seems that the markets are, like we suggested, focusing on the Fed more than the NFP number (199K vs. 400K expected). The fact that the number lagged so much behind doesn’t seem to matter as the wage data surprised on the upside. A 0.5% surprise in the annualised hourly earnings is substantial and is likely to be deemed by the markets as a green light for the Fed to move in March. The probability traders give to the Fed hiking rates in March went up to 79.3% as a result! By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.

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US December non-farm payrolls came in at 199K versus 400K expected. We expected to see a stronger number based on positive claims and services sector data and the fact that payrolls in the month of December are often propped up by the seasonal boost that Christmas creates. 

Instead, the number came in at the lower end of analyst expectations. According to Bloomberg, the analyst estimates ranged from 150K to 800K. This fairly wide range in the estimations speaks of the uncertainty the inflation, the Great Resignation and the Omicron variant created.

The unemployment rate was confirmed at 3.9% (4.1% expected) which is obviously good news. Average hourly earnings were also a positive surprise at 0.6% (0.4% expected). This moves the annual rate to 4.7% (4.2%) and highlights the need for the Fed to act in order to reign inflation in. 

Currency markets didn’t react strongly to this report even though the number came in substantially below expectations. The initial reaction was to sell the dollar and buy the commodity currencies but quite soon the markets reversed to the mean and are at the time of writing this report fluctuating near to the pre-announcement levels.

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

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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 analyzes 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. 

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