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Market Wrap
“Total nonfarm payroll employment rose by 266,000 in April, and the unemployment rate was little changed at 6.1%, the U.S. Bureau of Labour Statistics reported today. Notable job gains in leisure and hospitality, other services, and local government education were partially offset by employment declines in temporary help services and in couriers and messengers.” https://www.bls.gov/news.release/empsit.nr0.htm
From the statement above it would seem either the workforce has found the necessary amount of people to work in the jobs available, and that there was no need for the other 700K workers as expected by the market today, or there has been a shift somewhere else in the economy which means those looking for employment are either not being counted or are refusing temporary work whilst unable to find full-time work. The overall unemployment rate is little changed but maybe has peaked now at 6.0%, as the PMI’s are suggesting that they have peaked in March as well as the US10Y yields.
The market reacted in a way that signals that the inflation fear of an economy overheating does not sit true anymore. The CPI, the PCE, and now the labour force is suggesting that something is still not fully functioning either within the monetary policy of the Fed or US Treasury. And that the warnings are correct from Chair Powell of the recent inflation worries being transitory and the Fed will not be able to do anything for a couple of years, because as Chair Powell said, “some of those jobs are not coming back”.
It was not just the US employment data that missed expectations, Canadian employment dropped by -207.1K versus the expected -175.0K
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The US dollar dropped hard and tested the rising trend line that we have been monitoring, but more importantly, it has taken out the April swing low and is on the way to test the very key $90.00 price level.
The ActivTrader sentiment indicator for the EURUSD has unfortunately for these traders moved more bearish, with 73% of traders now short the single currency. I did say that these traders would likely get squeezed on a data miss today and that is what is currently happening. The EURUSD has taken the liquidity above the April 29th swing high but could easily now go on to test the 1.2200 level as more retail traders jump in short and there is little market structure to act as resistance.
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The GBPUSD daily chart has broken decisively to the upside and has started testing previous swing highs and the recent political embarrassment for the opposition party. Labour Leader Sir Keir Starmer said he “takes full responsibility”, but for traders, the incumbent party not being pressurised means that stability in policy is more likely and the risk of uncertainty has gone. Add in the weaker US dollar and Cable should have a bit of an easier time now.
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Copper has completed a measured move, so it will be interesting to see if the gains extend to the 161.80% Fibonacci Extension level, the macroeconomics suggests it has a good chance of getting there. With the US dollar giving the commodities such a boost today, the GBPCAD, GBPAUD and GBPNZD idea of seeing them get dragged up by the GBPUSD has not played out as I thought it may, but no real change in structure has occurred yet on the daily charts, so maybe next week we have a pound positive week across the board.
