Shocking Non Farm Payrolls (NFP)! What Will Fed Decide!?

Shocking Non Farm Payrolls (NFP)! What Will Fed Decide!?

The US economy created 431K new jobs in March, less than the expected 500K. However, a substantial upward revision of the February data (750K instead of the initially reported 678K) shows that the labour market is still recovering ahead of schedule, which is good news for the Dollar as it unleashes the hands of tighter monetary authority rhetoric.

NFP: less than expected. What will be the Fed's move? - 1

There are also several additional positives. The unemployment rate has fallen from 3.8% to 3.6%, one tick away from the 2020 low. Such a low figure was briefly recorded as long as in 1969, consistent with the weekly jobless claims data signals. Wage growth accelerated to 5.6% in the previous March, faster than the 5.2% (revised from 5.1%) a month earlier.

While there was not a solid initial reaction in the markets to this report, it should be seen as positive for the Dollar as it demonstrates the labour market’s strength. The combination of historically low unemployment, accelerated hiring, and higher wage rates are adding to the USA’s inflationary pressure.

NFP: less than expected. What will be the Fed's move? - 2

In the current environment, the chances are increasing that the Fed will announce active asset sales from the balance sheet at the 05th of May meeting or raise the rate by 50 points at once. So far, we are more inclined towards the first option to not create problems for the US treasury at the longer-term end of the curve.

Alex Kuptsikevich

Alex Kuptsikevich

Financial market professional with 16-years' experience and Senior financial analyst at FxPro. Author of daily reviews on the impact of economic events with comments regularly featured in top international and Russian media. Covers fundamental analysis, global markets, foreign exchange market, gold, oil, cryptocurrencies.

Alex Kuptsikevich is a regular contributor to both digital and print media including CNBC, Forbes, Reuters, MarketWatch, BBC and Coindesk.