Today’s Jobs Report Is Under The Fed’s Spotlight

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In the next few hours, all eyes across the board are headed toward the US once again, as we all wait for the US Jobs Report for the month of April.

This report is likely to have a notable impact on the markets, whatever the outcome is. Whether if it’s good or bad outcome, in both cases, be prepared for a notable move across asset classes.

Why Is This Report Different From Any Other?

Last month when March’s jobs report figures came in with an apparent decline, showing a significant slowing down in new jobs to just below 100K, the market now has a significant question, was March’s data transitory? Or it was the beginning of a slowing down.

Today’s report should give us a clear answer. If March’s data was transitory, then April’s figures should come in with much higher than expected, to cover March’s loss.

Otherwise, a weaker report would be a clear sign that a slowing down is already in place, which likely to lead to some actions by the Federal Reserve at its next meeting. Meaning, whatever the outcome is, the Fed’s meeting in June will be a key event for the market.

Expectations

The estimates for today’s jobs report are somehow encouraging.

The US economy is expected to add more than 190K new jobs in April after adding just 98K new jobs in March.

The Average Hourly Earnings is expected to rise by 0.3% in April compared to 0.2% in March.

However, the Unemployment Rate might rise once again to 4.6% up from 4.5%. Yet, the overall expectations remain positive.

What To Look For In Today’s Report

Wages are the key. The Federal Reserve needs to see more wages inflation to ensure that the core inflation is on the right track to hit its 2% inflation target.

Therefore, today’s jobs report should also give us more clues about the future trends of inflation. Meaning, even if the US Jobs Report came in with positive outcomes including NFP and Unemployment rate, while the wages came in weaker, this would keep the market uncertain about the Federal Reserve’s policy and intention to keep raising rates in the coming meetings.

Possible Weaker Report Signs

For the past few weeks, many economic figures have proved that the economy has been slowing down, including the first quarter GDP, which slowed down to 0.6%, despite the fact that the estimates were to grow by 1.7%.

Moreover, many of the employment components showed some slowing down compared to the previous ones, whether in Retail Sector, Manufacturing, or Non-Manufacturing sectors.

These signs lean toward a weaker report today. However, and as we all know, a surprise is always possible when it comes to the US Jobs Report. This is what we learned from the history.

USD Index Outlook

The US Dollar Index has been trading within a tight range since the announcement of the first round of the French election, trading between 99.30’s and 98.70’s without a clear break above or below those two levels.

Moreover, the index also hasn’t closed the trading gap that occurred two weeks ago due to the French election, which keeps the possibility for a rebound to close that gap before the trend resumes.

Moreover, the technical indicators now are heavily oversold on most time frames, which also support the idea of another bounce ahead, before the trend resumes.

Such positive outlook remains on the table as long as the index continues to trade above that support level.

However, only a break below 98.50 with a daily close below that support, would deepen the downside outlook, which may lead to another leg lower, probably toward 98.0 and/or 97.70’s.

 

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