Summary:

• US NFP comes in at 103k vs 188k exp but prior revised higher (326k)
• Average earnings rise to 2.7% y/y on as expected; 2.6% prior
• USD drifting lower; precious metals rise

The eagerly anticipated NFP release has delivered a slightly mixed message for the US dollar, although on balance it appears to be slightly negative. The headline figure fell to 103k vs 188k expected after last time’s stellar print of 326k (revised higher from 313k) and this seems to be dominating the initial market reaction with yields falling lower alongside the US dollar and precious metals rising. The drop is also a little more disappointing given that the ADP figure earlier this week was better than forecast and therefore raised the markets expectations a little. 

 

 Non-farm payrolls dropped sharply despite the ADP reading for March beating forecasts. Source: XTB Macrobond

Many traders were looking closer at the wage component of today’s report and whilst this did show an increase, the rise was as expected and therefore this hasn’t really provided a positive boost for the buck. Average earnings Y/Y increased to 2.7% from 2.6% previously but this remains below the 2.8% seen back in February, and whilst it is high relatively speaking it is not showing much of an uptrend over recent months. It is worth noting that the current level of wages is well above the CPI core reading and this could be seen to suggest that inflation will pick-up further in the going forward.  

 Wages rose slightly as expected and they remain close to their highest level in recent years. Will inflation soon follow them higher? Source: XTB Macrobond 

In terms of market reaction the US dollar has come under some pressure since the release with the buck handing back some of its earlier gains. The drop has been fairly measures so far with one of the clearer moves coming in the GBPUSD with the pair rising around 40 pips since the release. 

 GBPUSD has risen since the release with the US dollar falling back. Source: xStation

The cross appears to be respecting a longer term trendline going back to last November. Yesterday’s high of 1.4095 is an area to look for possible resistance but if price can move above there then we could see a move back towards 1.4265. 

 

  A longer term trendline appears to have been respected and now the pair is looking to push higher once more. Source: xStation

 Looking at other market precious metals are pushing higher (Silver +0.70% and Gold +0.59%) on the USD weakness whilst there is no clear discernible moves in stocks yet as they are oscillating around levels seen prior to the release ahead of the US open.