The all-important non-farm payrolls number out of the US was released during today’s European session trading hours. The number showed a rebound from March’s underwhelming figure but failed to lift the dollar. Other important news pertained to Canada’s jobs report, which was also released today.
The dollar index, measuring the greenback against the currencies of six major US trading partners, was more or less flat in late European session trading after falling to a near six-month low of 98.68 earlier in the day. Euro / dollar and dollar / yen were last trading at 1.0988 and 112.63 respectively, both close to where they started the day. Despite only marginally gaining relative to the dollar, the euro touched six-month highs earlier in the day on the back of growing expectations of an Emmanuel Macron victory over far-right candidate Marine Le Pen on Sunday’s second round of French Presidential elections.
Today’s US non-farm payrolls report showed job growth recovering in April as 211,000 positions were added to the economy. The number exceeds the 185,000 projected by analysts and stands far above March’s downwardly revised figure of 79,000 (from 98,000 before), which was negatively affected by weather factors. The unemployment rate dropped to the near ten-year low of 4.4% from 4.5% in March, positively surprising as forecasters anticipated it to tick higher to 4.6%. Looking at average hourly earnings, those came in at a 0.3% growth rate as expected. Hourly earnings for March were revised down to 0.1% from the previous 0.2%. Lastly in terms of data, the labor force participation fell slightly to 62.9% from 63.0% the previous month. This means that a smaller portion of the working age population is now part of the labor force. Despite this, in aggregate, the data point to a healthy labor market that continues to improve.
Market reaction following the data showed market participants did not emphasize on the strong non-farm payrolls number but also payed attention to other not so rosy aspects of the report. The greenback failed to post gains against majors such as the yen, euro and sterling. Especially against the euro, the dollar not only did not record gains but also experienced sizeable losses. Euro / dollar rose close to the daily high of 1.0991 from 1.0959 before the report’s release.
Today saw the release of Canada’s jobs report for the month of April as well. Jobs growth disappointed with the number of jobs added standing at a mere 3,200, significantly below the 10,000 expected and March’s 19,400. On the positive side, the unemployment rate fell to its lowest since 2008 to reach 6.5% from 6.7% in March, with the March figure also coinciding with analysts’ forecasts. However, the unemployment rate fall was associated with a decline in the labor force participation rate (i.e. people exiting the labor force contributed to the unemployment rate falling). Growth in average hourly wages was not strong either. Dollar / loonie reaction was muted following the release of the data, which coincided with the release of the US jobs report. For the day, dollar / loonie looks set to close lower after ten straight days of advances and the near fourteen-month high of 1.3793 recorded today. The loonie gained on the oil price recovery later in the day.
Turning to oil, concerns of a global oversupply led WTI crude recording a five-and-a-half-month low of $43.76 a barrel and Brent crude a five-month low of $46.64 a barrel today. Some comments by Saudi Arabia’s OPEC chief during European trading hours reignited the discussion on extending the deal to cut output that went into effect on January 1st and was initially scheduled to last for six months. Both WTI and Brent crude posted a recovery after the comments and were last trading more than 2.0% higher on the day. The Baker Hughes Oil Rig Count out of the US at 17:00 GMT will be closely watched.
A number of Fed officials, including Federal Reserve Chair Janet Yellen and Vice Chair Stanley Fischer, will be talking later in the day. Their comments have the capacity to move the markets.