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February US Unemployment Report In Sight

Daily Analysis - 10/03/2017

Fed’s Final Hurdle to a Rate Hike Lies Ahead With Nonfarm Employment Figure

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Following the blockbuster private-sector jobs data earlier this week, investors are anxiously awaiting the US Labor Department’s non-farm payrolls figures for February, scheduled for release later on Friday, for further confirmation that the economy is stable enough to endure higher short-term interest rates.

Equity Investors Turn Cautious Ahead of NFP


The US Bureau of Labor Statistics is forecast to report the addition of 190,000 new jobs last month, while the unemployment rate is expected to edge lower to 4.70% from 4.80%. Wages are also likely to rise 0.30%, a pace higher than the prior month’s 0.10%.

The Federal Reserve will be closely monitoring the labor figures for further reassurance on the strength of the US economy. The past week has seen expectations for a rate hike during the Central Bank’s March 14-15 gathering skyrocket on the back of a string of better-than-expected data points, including the ISM and ADP numbers.

The CME Group’s Federal Funds futures that tracks market expectation for changes in monetary policy, is showing a 90.00% likelihood of a 0.25% increase in the benchmark rate next week.

While most US stock index futures ended Thursday flat, Nasdaq futures have managed to gain ground, trending back towards record highs.

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WTI Futures Fall Below $50.00


Oil prices are stumbling below $50.00 a barrel on Friday amid investor concern that the relentless surge in US domestic production is more than offsetting the gains made from the OPEC-led output cuts.

The benchmark West Texas Intermediate April crude futures fell to as low as $48.60, before rebounding modestly to around the $49.50-mark. Market sentiment took a nose dive after higher prices for the past couple of months enticed more US shale companies to re-enter the market after a lull, while stockpiles continue to record new highs.

Data released Wednesday showed US crude inventories swelled last week by 8.209 million barrels to a record 528.4 million barrels.

Investors are focusing on the meeting of energy ministers and oil executives at CERAWeek in Houston that concludes today for any new fresh clues to stem the supply glut or an extension of output cuts from OPEC.

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ECB Keeps QE, Rates Unchanged


The European Central Bank left its quantitative easing program unchanged as decision makers within the Central Bank try to assess whether the recent spike in inflation will be sustainable. The ECB’s Governing Council reiterated its decision that asset purchases per month will be tapered to €60 billion from April, versus the current €80 billion.

Policymakers also kept the benchmark refinancing rate at 0.00% and the deposit rate at -0.40%, matching consensus expectations. Two years of government bond buying has lifted headline inflation above ECB’s stated target, and calls to cut back on stimulus are mounting. President Mario Draghi has sought to ease those pressures by suggesting that price acceleration is largely on account of higher energy costs, and that political risks, including elections in France and the Netherlands, has the potential to undermine the recovery.

The Euro fell against the US dollar after the decision, and was last trading just below 1.0600.

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Gold Suffers Worst Losing Streak Since May 2016


Gold prices fell below the key psychological level of $1,200 pre troy ounce in early Friday trade to hit its lowest in more than five weeks as the US dollar rallies ahead an expected Federal Reserve interest rate hike next week.

Rising rates typically depress gold prices, as they increase the value of US dollar, and make bonds look better on a relative basis compared to the non-yielding metal.

Gold futures ended in the red for the eighth straight session on Thursday. The last time bullion witnessed such a bad run was in May of 2016. Adding to the bearish undertone was data that showed holdings of the SPDR Gold Trust, the world's largest gold-backed ETF, fell -0.32% on Thursday.

Gold is currently stuck in a tight range between $1198 and $1199 per troy ounce.

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Upcoming Events

  • Time
  • Currency
  • Event
  • Forecast
  • Previous
  • 09:30 GMT
  • GBP
  • Manufacturing Production MoM (January)
  • -0.60%
  • 2.10%
  • 13:30 GMT
  • USD
  • Nonfarm Payrolls (February)
  • 180K
  • 227K
  • 13:30 GMT
  • USD
  • Unemployment Rate (February)
  • 4.70%
  • 4.80%
  • 13:30 GMT
  • CAD
  • Unemployment Rate (February)
  • 6.80%
  • 6.80%

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