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2
Jun

U.S. Non-Farm Employment Change, Unemployment Rate

calendar 02/06/2023 - 08:15 UTC

The U.S. dollar fell on Thursday, with the USDX posting a 0.64% decline, breaking below the range seen in the past week to end the day close to the 103.5 mark. Against the Turkish Lira, the dollar traded moderately higher on Thursday, posting a 0.34% increase to end the day close to the 21.0 mark, right below its record high of 21.10. Other emerging pairs such as the USD/ZAR, the USD/INR and the USD/MCN also started displaying some intense reversal signals on yesterday’s session, all ending with mild losses.

Investors focus shifts towards the U.S. employment sector on Friday, and specifically on the Non-Farm Payrolls data that is expected to show some weakness in the sector for May, giving the Fed some motivation to hold interest rates steady. But given that the data has surprised to the upside for 12 of the 13 past months, investors remain on alert. On the monetary policy front, the Fed rate monitoring tool shows that markets are positioning for a nearly 74% chance the Fed will hold rates on June 14.

Weaker-than-expected official manufacturing activity data from China had weighed heavily on industrial metal prices, with copper sinking to six-month lows, however, a weaker outlook for the dollar spurred some flows into gold, helping prices recover from over two-month lows.

Some support was seen in U.S. equities markets on Thursday, as debt ceiling concerns seem to be fading and as the anticipated weakness in the U.S. employment data due later today, could keep the Fed from moving to further rate hikes. The main U.S. 500, the US 30 and the US tech 100 that is reflects the price of the tech-heavy Nasdaq all posted some solid gains of 0.80%, 0.50% and 1.21% respectively, and continue to move higher into positive territory early on Friday, ahead of the long-awaited U.S. employment figures.

Market participants now look to the release of the Non-Farm Payrolls as well as average hourly earnings and the unemployment rate for possible hints on where the Fed is headed and how markets will react.

EUR/USD

The pair EUR/USD rose significantly, rebounding from monthly lows, and is currently trading above 1.0750 ending Thursday’s session 0.63% higher.

Eurozone April data released confirmed a slowdown in inflation, with the CPI rosing 6.1% compared to a year ago while the core rate dropped to 5.3%. European Central Bank President Christine Lagarde noted that the bank is not pausing, stating that there is still work to do as inflation remains elevated and far from the target.

On the other hand, the dollar posted a decline with the Fed officials signalling that the rate is likely to hold steady in June. The ADP report yesterday exceeded expectations with an increase in private payroll of 278K, while the ISM manufacturing PMI dropped to 46.9 in May. The key report on Friday will be the Nonfarm Payrolls, which are expected to rise by 190K.

EUR/USD

Gold

Gold prices for a third consecutive session posted gains ending the session 0.55% higher as the dollar tumbled on weaker U.S employment and manufacturing data which is a sign of a rate hike pause in June. Philadelphia Fed President Patrick Harker said on Thursday U.S. central bankers should not raise interest rates at their next meeting, even though high inflation is coming down at a “disappointingly slow” pace. Industry reports showed layoffs in the U.S tech, retail, and auto sectors as overall hirings came in at the lowest level since 2016.

Gold market participants are now fully focus on Friday’s non-farm payrolls. Gold prices are enjoying some soft U.S data that may affect the odds of rate hike and if the U.S job report does not impress may volatility in gold prices is expected to be high.

Gold

WTI Oil

Oil prices rose on Thursday with the WTI Oil contract posting 3.48% gains at the end of the session. The price rose by the most in two weeks while the House of Representatives passage of a bill to suspend the U.S. debt ceiling helped to offset the impact of rising inventories in the country. The U.S. Senate voted in favor of a bipartisan bill to increase the government spending limit and stave off a potentially devastating default.

The uncertainty over the Organization of Petroleum Exporting Countries and allies (OPEC+) plans for future production cuts limited bigger gains on Oil Prices , ahead of a meeting between members this Sunday. Saudi Arabian and Russian ministers offered mixed signals on plans to trim production ahead of the meeting, following a surprise supply cut in April.

U.S. oil inventories unexpectedly grew over the past week, pointing to a high level of supply and softening demand even as the travel-heavy summer season kicks off.

WTI Oil

US 500

U.S main indices posted gains on Thursday’s session as signs of slowing wage pressure raised hopes that the Federal Reserve might pause hiking rate interest rates while Congress voted to suspend the U.S debt ceiling.

The US Tech 100 ended the session 1.21% higher at around 14484.00 meeting the highest levels since April 2022, while US 500 and US 30 posted gains of 0.80% and 0.50% respectively.

The number of Americans filing new claims for unemployment benefits rose modestly last week, while private payrolls increased more than expected in May, pointing to a still tight labor market but the focus now shifts to the Labor Department's closely watched unemployment report for May, due on Friday. The data will help determine whether the Fed sticks with its aggressive rate hikes.

US 500

The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.

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