Market News & Insights
10 April 2017

Poor US Employment Data Equals Muted Market Response

The highlight from markets on Friday was of course the latest employment data from the US with March’s Non-Farm Payrolls being the headline release. The report significantly missed expectations showing employment growth in March at only 98K new jobs created versus consensus expectations for 180K. Quite a miss but from a FX perspective, the dollar didn’t react as one would initially expect once the reasoning behind such a figure and additional data was released. The smaller increase in jobs was part explained by several storms that hit the major centres on the east coast, so in isolation the figure is unlikely to represent a trend. In additional, we saw the unemployment rate fall further from 4.7% to 4.5%, plus wage inflation remain undisturbed at 2.7% on an annual basis.

Initially the market didn’t know how to react with the dollar seeing directionless trading against its major peers whilst US equities showed little or no reaction with the S&P500 falling 0.1% and the NASDAQ unchanged however towards the London close, the dollar saw a mini rally with several large buying trades reported pushing both the EURUSD and GBPUSD lower by the week close. EURUSD finally broke through the 1.06 mark and continues to trade in a 1.0580-90 range this morning. Similarly cable broke lower to below 1.24 but now is too trading narrowly in a 1.2375-90 range this morning.

This lack of any significant direction for major currencies is also being felt in EURGBP that appears to be looking for directional support. Friday was another potentially busy day for the pound with BOE Governor Carney speaking along with the release of key industrial and manufacturing data. As we wrote on Friday, these figures yet again disappointed and initially only had a minor impact on the value of sterling and from a EURGBP perspective, the pair actually traded lower on the day but failing to break through the key level of .8520 (GBPEUR 1.1737). This morning so far it appears to be trading in that direction but still struggling to get near that key support line, so we could be disappointed yet again.

After such muted responses to several key events last week, I don’t see any change to that today with the economic diary on the light side until a scheduled speech by Fed Chair Janet Yellen at the University of Michigan scheduled for tonight. Fed watchers will keep a firm eye on this but we don’t any expect any new news to be disclosed at this. From a political perspective (which now is as important as the economics), we have a significant meeting between the US Secretary of State and the Russian government on Wednesday. We also have the pending French elections hovering in the background.