The latest US jobs report was broadly well received even though the headline reading was a bit of a disappointment. In March, 431,000 jobs were added, and that came in below economists’ expectations of 490,000. On the bright side, the previous report was upgraded to 750,000 from 678,000. The unemployment rate dropped from 3.8% to 3.6% - its lowest level in two years. Average earnings on a yearly basis were 5.6%. Overall, the update was strong, and it should reinforce the argument for the Federal Reserve to keep lifting interest rates. In the past couple of weeks, there has been increasing speculation the Fed might lift rates by 0.5% in May, and considering today’s data, the chatter is likely to hang around.
In a way, good news is bad news, as there are fears of a recession on the horizon due to the inversion of the US yield curve. The yield on the 30-year bond is below that of the 5-year bond, in fact the inversion is now deeper in the last few hours, which suggests the fear of a recession is greater. As a result, the Dow Jones and the S&P 500 are down on the session. Earlier this week, the S&P 500 hit a two-week high, so a pullback is not a surprise.
The temperature surrounding the Ukraine-Russia situation has cooled a little following Moscow’s demand yesterday that payments for natural gas be made in roubles. Despite the ongoing violence, traders are less fearful about the war.
EUR/USD and GBP/USD are down on the session because of the firmer greenback. The muted oil market has helped USD/CAD edge higher. Gold is lower today as the upward move in the dollar has removed some of the metals shine. Also playing into the mix, is that worries about Russia striking back at Western governments have faded.