The dollar strengthened only for a moment, gold recorded records

After the last NFP report, the dollar managed to strengthen only for a moment. EUR / USD exchange rate after a temporary drop below the 1,08 level, it returned to growth and ended close to the opening level. US stocks ultimately gained, although the initial reaction was negative. US bond yields rose. Currently, the market is giving just over 45 percent chances of an interest rate increase in June by the Fed.

Decrease in the unemployment rate in the USA

The US labor market does not intend to slow down for now. This is according to Friday's data, which beat the market consensus and showed solid numbers. 303 thousand new jobs this is a result above the most extremely optimistic forecast among those presented by analysts surveyed by Bloomberg. This strong increase is partly due to the creation of government vacancies, which numbered as many as 71. The strength of the labor market is also indicated by the drop in the unemployment rate, from 3,9 percent. decreased to 3,8 percent. If we look at larger details, we will also notice increase in the professional activity rate from 62,5 percent up to 62,7 percent.

Monthly wage pressure increased to 0,3%. and on a year-to-year basis we have an expected drop to 4,1%. This is slightly more than in the pre-pandemic period, when in 2019 the average annual dynamics amounted to 3,3%.

New records for gold

After Friday's data, the market reduced its estimate of the probability of a rate cut in June from 60 percent. up to 45 percent The dollar gained and then gave back all of this growth - this shows that NFP is important, but not crucial at this point. Let us remember that Powell emphasized that during his last conference there may even be reductions if the labor market does not fall into recession. Perhaps the market had this in the back of its mind and that's why it reacted the way it did.

Gold shot up to USD 2330 (and today it was even above USD 2350), setting new records, which is an unusual reaction, because usually when the dollar gains, the valuation of the metal falls. This time we have a decrease in negative correlation. US bond yields have risen, an understandable reaction as the market expects higher rates for an extended period of time. In the first reaction, the indexes decreased, but very quickly returned to the opposite trend, which can be explained by the fact that good data is good data for the stock market, and that's all. However, the scale of their increases is so small that it has not been able to fully reduce the reductions from Thursday, which were caused by hawkish comments from the Fed.

Source: Łukasz Zembik, OANDA TMS Brokers