Majority of stock markets in Europe are shut today in observance of the Good Friday holiday. There will be no cash trading session on Wall Street today either. However, FX markets are operating normally and US index futures will trade until 2:15 pm BST today.
Limited liquidity means that markets that are running may see some outsized, volatile moves in response to US jobs market data for March, scheduled for release at 1:30 pm BST. A recent streak of downbeat data from US labour market suggests that we may be in for a weak NFP reading today:
- JOLTS, or new job openings, dropped below 10 million for the first time in almost 2 years. This was also one of the biggest monthly drops in recent years
- Declines in ISM employment subindices. Manufacturing gauge dropped from 49.1 to 46.9 while services gauge moved from 54.0 to 51.3
- Higher-than-expected planned lay-offs according to Challenger report - almost 320% YoY increase!
- ADP data at 145k in March - below 200k expected and also below 3-, 6- and 12-month average
- Weekly jobless claims at 228k. Previous reading revised higher from 198k to 246k
New job openings drop, the number of newly unemployed increases and companies are more reluctant to hire. Is the US jobs market in trouble? Source: Bloomberg, XTB
However, it should be noted that NFP data has a good track record of beating both - expectations and ADP readings - in recent months. NFP data beat expectations for 11 months in a row! This shows that analysts' overestimate the impact of tightening on the labor market. Moreover, household surveys showed an employment drop on a few occasions in recent months, even as employer surveys (NFP) continued to show relatively high employment gains. What does the market expect from today's report?
- Non-farm payrolls. Expected: 240k. Previous: 311k
- Unemployment rate. Expected: 3.6%. Previous: 3.6%
- Average earnings growth. Expected: 4.3% YoY. Previous: 4.6% YoY
EURUSD
USD is trading slightly higher today but EURUSD remains above 1.09 mark and maintains the uptrend. The latest drop in US yields shows that USD still has room to drop. If NFP data shows sub-200k jobs gain, it would be a strong sign of the labour market cooling down. However, it will not be a sign of a crisis yet. Nevertheless, readings that are significantly below 200k would likely encourage the Fed to pause the rate hike cycle and not raise rates at the May meeting. On the other hand, should we once again see strong job gains and strong earnings growth, rate hike at the May meeting may be still in play.
EURUSD is trading slightly lower today but the uptrend is maintained. Source: xStation5
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