Good labour market report can promote interest rate upturn

Posted 02 November, 2018

The US labour market has posted a good performance in October, including non-farm employment figures, as the report of US Department of Labour released today showed. Average hourly earnings rose 3.1% y-o-y, which came in line with the expectations. For reference, the last-month increase was 2.8% y-o-y. As for the unemployment rate, it stays low in the USA, expectedly reaching 3.7% in October, unchanged from September.

This means that full employment becomes more real in the country this autumn. For example, the unemployment rate was at 3.9% in summer. At the same time, the new jobs unexpectedly soared by 250,000 (2-fold above the September results), while the market analysts expected an increase of 190,000.

According to the American economists, a job increase of 200,000 adds some 3% to US GDP. In October, we see as much as 250,000 in the non-farm segment and this fact will support the GDP growth unless this rate is recalculated and downgraded afterwards.

The Federal Reserve pays attention to such data as non-farm payroll while determining further revision of the interest rate. In this case, the observed good results can promote further upward revision of the rate during the upcoming meeting of the Fed open market committee. At the same time, the currency market hardly reacted to this report, the market analyst noted.

The US dollar continued losing grounds vs the euro, though with today's report the decline has slowed down. Meanwhile, the US dollar slightly changes vs the Japanese yen. It seems that further increase of the interest rate hardly can put strong pressure on the global currencies this time, as Donald Trump beats up this possible impact expressing readiness to meet Beijing half-way in terms of the foreign trade. According to the market forecasts, the euro-to-US dollar rate can come to 1.139-1.148.
 

Previous forecast

06 November, 2018 15:46

← Iran to record oil supplies collapse in November, some upturn possible later

Oil exports from Iran collapsed on extended US sanctions in mid-2018. However, the major importers from Iran are going to boost buying benefiting from softer restrictions granted by Washington. The USA met halfway the largest investors (India, China, South Korea, Japan, Italy, Greece, Taiwan and Turkey) and agreed to make some concessions regarding the restrictions. These countries can buy out at least some volumes for another 180 days, so oil exports can hike beginning from December.

Iran to record oil supplies collapse in November, some upturn possible later

Next forecast

01 November, 2018 15:59

Strong labour market report can support US dollar →

The US dollar is losing grounds in the second half of the week, though ADP posted good enough labour market report. Earlier, traders used this report as a guideline for the outlook regarding the main report to be released on Friday. The private employment rate hiked by more than 200,000, which indicates that the US labour market in a good fettle now. However, fluctuations of the sentiments fueled US dollar weakening. Demand for the greenback as well as risk aversion activities slackened. Extra pressure on the US Dollar index came from the soaring sterling on the recent progress in the Brexit. Specifically, it was reported that the UK and EU representatives agreed that the UK financial companies will maintain access to the EU market after the divorce. In this situation, the sterling hit 1.29, with the euro follows to toe reaching 1.14.

Strong labour market report can support US dollar
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