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NFP dashes hopes of rate policy clarity

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By Jameel Ahmad, Chief Analyst at CompareBroker.io  

Anyone hoping that we were going to get an indication on the future outlook of US interest rate policy from the monthly United States employment report has had their hopes dashed.

The headline non-farm payrolls jobs number has provided all the help that the Federal Reserve could have needed to wait for clarity from more future economic data releases. The United States added 253,000 jobs to its economy in April, well above expectations of 185,000.

The headline number does not provide substance to support the view that the fastest cycle of US interest rate increases in a generation would lead to a sharp loss of life for the US employment sector. This can be seen even more clearly from the unemployment rate coming in at 3.4%, below expectations of 3.6%.

The employment market is showing clear resilience despite the drastic increase to US interest rates over the last year and this resilience is going to afford Fed policymakers patience to ultimately continue to watch economic data before making any decisions over the narrative on the future monetary policy outlook.

Overall, this employment report does not suggest either that interest rates need to be further increased or decreased. Instead, it suggests that interest rates are fine exactly where they stand.

Support

This will likely also provide near-term support for the US Dollar.

Losers of a supported USD will most likely be the Eurodollar, which failed to climb beyond the 1.10 handle during the ECB interest rate decision yesterday. This is likely to accelerate its downfall back below 1.10. Appetite for Gold should remain intact for as long as the precious metal can defend the previous psychological resistance at $2000 as support.

One asset that might ironically cheer this jobs report is Oil. This is because the commodity has been sold heavily by recession fears throughout the past trading week, yet the jobs report along with relatively upbeat comments from central bank officials and statements throughout the week suggests that there is some hope a recession can be avoided this year.

 

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