The US Dollar and Non-Farm Payroll

The US stocks have extended its rally overnight as they turn to focus more on employment data. The Dow Jones Industrial Average (DJIA) closed at 44.58 points or 0.26 percent. Meanwhile S&P closed at 6.95 points or 0.35 percent. The treasury, on the other hand, might be losing its touch as its 10-year yield closed at 1.83. Crude oil is having trouble on looking for a follow through buying over 35 handle; while gold is increasing as high as 1269.3. However, as what most of us thought, the strength of gold is primarily due to the dollar rather than being a “safe haven”. The rebound of the dollar’s index closed at 98.85 earlier this week and is recently trading at 97.6. This occurrence can also be noticed in the forex market as the dollar is trading relatively lower against the basket of major currencies.

Currently, the main focus is the report on the non-farm payroll of the US. Markets are expected to project about 198K growth in February. Unemployment rates are expected to remain the same at 4.9 percent; while average hourly wages are expected to increase by 0.2 percent. According to reports showed by the ADP, there’s 214 growth of jobs in the private sector compared to the previous month’s 193K. The employment rate of ISM manufacturing increased to 48.5 from 45.9. Meanwhile, ISM services employment rate reached below 50 at 49.7, which is the first time since February 2014. One-month moving average of initial jobless claims decreased to 270k from 285k. Confidence consumer board, on the other hand, decreased to 92.2 from 97.8. In conclusion, the combination of pre-NFP data shows a risk of a slowdown in job growth. The NFP today isn’t likely to give any incredible result; thus, there might be a downside surprise.

However, the NFP report may not change the view of the market on the interest rate hike of the Fed; a rate hike in March is definitely ruled out. But there is a 33 percent chance of a hike in June. Robert Kaplan, the Fed president of Dallas, encouraged the people to have a little more patience on the raising rates. He said that, “While I believe that excessive accommodation carries a cost in terms of distortions and imbalance in hiring, asset allocation and investment decisions, I also believe that, at this juncture, the Fed needs to show patience in decisions to remove accommodation.”

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