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US Open Preview – Greenback firms as markets await US employment data
May 4, 2018 11:26 amVideo
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Here are the latest developments in global markets:
Day ahead: US employment report to dominate attention
The main event today will be the release of the US employment report for April, at 1230 GMT. Nonfarm payrolls are expected to have risen by 192k, much higher than the 103k recorded in March. Meanwhile, the unemployment rate is projected to tick down to 4.0%, from 4.1% in the previous month. As for the all-important average hourly earnings, the forecast is for the monthly rate to have slipped to 0.2%, from 0.3% previously, which would keep the yearly rate unchanged at 2.7%.
As has been the case with recent jobs reports, attention is likely to fall mainly on earnings. Payrolls and the unemployment are of course very important, but a strong set of numbers on that front would simply confirm what investors already know; that employment growth remains strong. On the other hand, wage growth is the missing piece of the puzzle for the Fed. It has not picked up in a meaningful way despite a tight labor market, confounding policymakers that expect rising wages to push up inflation. Accelerating wages would signal higher inflation down the road, sparking bets for a more hawkish Fed, and vice versa. Therefore, the dollar is likely to move in tandem with any surprise in earnings today; higher in case of a beat, and lower should they disappoint.
US stock markets are likely to be affected by the jobs data as well. Expectations for higher interest rates typically spell bad news for equity indices, while anything that suggests rates may stay low for longer is usually positive. Thus, should strong data spark bets for a more hawkish Fed, then equities are likely to experience declines, whereas a disappointment in the figures could lead to a move higher.
Elsewhere, Canada’s Ivey PMI for April will be in focus at 1400 GMT.
In energy markets, the Baker Hughes oil rig count at 1700 GMT should provide a fresh indication of whether US production continues to soar.
As for the speakers, the New York and San Francisco Fed Presidents, William Dudley and John Williams, will deliver remarks at 1445 and 1730 GMT respectively. A few hours later at 2130 GMT, Fed Board Governor Randal Quarles will step up to the rostrum. All these officials are voting members of the FOMC this year, so their comments will be closely watched. This may be especially true in the case of John Williams, who will be replacing Dudley as the influential head of the New York Fed soon.
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