May NFP Report Send U.S. Stocks to Record Highs and Dollar to Eight-Month Lows
June 5, 2017 9:42 am
The market’s reaction to the latest U.S. jobs data known as the Nonfarm Payroll (NFP) was swift on Friday. As the dollar sold off, traders rallied behind stocks on expectations the Federal Reserve won’t rush to normalize policy in the remainder of the year.
NFP Disappoint
U.S. employers added just 138,000 workers to payrolls last month, the Labor Department said in its latest NFP report. That was well below a median estimate of economists calling for 185,000. The official print undershot a private payrolls report from ADP on Thursday, which showed the creation of 253,000 jobs for May.
The unemployment rate fell unexpectedly to a new 16-year low of 4.3%,[1] but came at the expense of workforce participation. The labour participation rate fell to 62.7% from 62.9%. This means only 62.7% of eligible working-age Americans were either employed or actively searching for work.
On the earnings front, average wages increased just 0.2% on month and 2.5% annually. Analysts had expected a 2.6% year-over-year gain.
Dollar Plunges Following NFP Report
The U.S. dollar is highly sensitive to NFP data, especially when the headline indicator diverges significantly from the median estimate. The dollar index declined immediately after the NFP release to settle at 96.72 – the lowest since early November.
A weaker dollar drove the euro above a key technical threshold, putting the EUR/USD on course to continue higher in the week ahead. The EUR/USD settled 0.6% higher at 1.1279 on Friday, the highest since last September.
A weaker dollar also shielded the British pound from further losses, with the GBP/USD settling flat at 1.2882.
Precious Metals Rally following NFP Report
A falling dollar played into the hands of gold and silver prices. The metals spiked to multi-month highs on Friday, with gold trading above $1,280.00 a troy ounce. Silver bullion finished up 1.4% on Friday to close at $17.53 a barrel.
Greenback-denominated precious metals often trade inversely with the dollar, making them sensitive to fluctuations in the U.S. currency.
NFP Report Pushes Stocks Up
Weak jobs data were shrugged off by investors on Wall Street, with the S&P 500, Dow Jones Industrial Average and Nasdaq Composite setting fresh records on Friday. It was the second consecutive session the major bourses finished at all-time highs.[2]
European markets also finished firmly higher on Friday, with the Stoxx Europe 600 Index adding 0.2%. Germany’s DAX was the strongest performer in percentage terms, adding 1.3%.
While the Federal Reserve is widely expected to raise interest rates this month, weak economic data as of late suggest the path to policy normalization might be slower than previously expected. This environment could play into the hands of the equity indices in the immediate term.
The fallout from the NFP report will probably still be felt in the coming days as traders evaluate the performance of the U.S. economy. U.S. gross domestic product (GDP) expanded just 1.2% annually in the first quarter, the slowest in a year.
References
[1] Eric Morath (2 June 2017). “Unemployment Rate Falls to 16-Year Low, But Hiring Slows.” The Wall Street Journal.
[2] Sam Bourgi (2 June 2017). “DJIA Today: Dow Jones Futures Post Second Straight Record Close.” Economic Calendar.
The market’s reaction to the latest U.S. jobs data known as the Nonfarm Payroll (NFP) was swift on Friday. As the dollar sold off, traders rallied behind stocks on expectations the Federal Reserve won’t rush to normalize policy in the remainder of the year.
NFP Disappoint
U.S. employers added just 138,000 workers to payrolls last month, the Labor Department said in its latest NFP report. That was well below a median estimate of economists calling for 185,000. The official print undershot a private payrolls report from ADP on Thursday, which showed the creation of 253,000 jobs for May.
The unemployment rate fell unexpectedly to a new 16-year low of 4.3%,[1] but came at the expense of workforce participation. The labour participation rate fell to 62.7% from 62.9%. This means only 62.7% of eligible working-age Americans were either employed or actively searching for work.
On the earnings front, average wages increased just 0.2% on month and 2.5% annually. Analysts had expected a 2.6% year-over-year gain.
Dollar Plunges Following NFP Report
The U.S. dollar is highly sensitive to NFP data, especially when the headline indicator diverges significantly from the median estimate. The dollar index declined immediately after the NFP release to settle at 96.72 – the lowest since early November.
A weaker dollar drove the euro above a key technical threshold, putting the EUR/USD on course to continue higher in the week ahead. The EUR/USD settled 0.6% higher at 1.1279 on Friday, the highest since last September.
A weaker dollar also shielded the British pound from further losses, with the GBP/USD settling flat at 1.2882.
Precious Metals Rally following NFP Report
A falling dollar played into the hands of gold and silver prices. The metals spiked to multi-month highs on Friday, with gold trading above $1,280.00 a troy ounce. Silver bullion finished up 1.4% on Friday to close at $17.53 a barrel.
Greenback-denominated precious metals often trade inversely with the dollar, making them sensitive to fluctuations in the U.S. currency.
NFP Report Pushes Stocks Up
Weak jobs data were shrugged off by investors on Wall Street, with the S&P 500, Dow Jones Industrial Average and Nasdaq Composite setting fresh records on Friday. It was the second consecutive session the major bourses finished at all-time highs.[2]
European markets also finished firmly higher on Friday, with the Stoxx Europe 600 Index adding 0.2%. Germany’s DAX was the strongest performer in percentage terms, adding 1.3%.
While the Federal Reserve is widely expected to raise interest rates this month, weak economic data as of late suggest the path to policy normalization might be slower than previously expected. This environment could play into the hands of the equity indices in the immediate term.
The fallout from the NFP report will probably still be felt in the coming days as traders evaluate the performance of the U.S. economy. U.S. gross domestic product (GDP) expanded just 1.2% annually in the first quarter, the slowest in a year.
References
[1] Eric Morath (2 June 2017). “Unemployment Rate Falls to 16-Year Low, But Hiring Slows.” The Wall Street Journal.
[2] Sam Bourgi (2 June 2017). “DJIA Today: Dow Jones Futures Post Second Straight Record Close.” Economic Calendar.
The post May NFP Report Send U.S. Stocks to Record Highs and Dollar to Eight-Month Lows appeared first on Forex.Info.
Source: Easy Forex Forex.Info
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