The stock market made a big jump today based on the positive jobs number of adding 136,000 jobs in September, unemployment rate hits 50-year low. With weak manufacturing activity, most of the hiring in September focused on the services sector. Education and health care providers held 40,000 positions.
The government added 22,000 workers in September, but only 1,000 of the jobs were due to federal hiring for the 2020 Census. Economists expected a much larger increase in census workers.
Retailers eliminated 11,000 jobs and manufacturers reduced 2,000 workers. Going back, the growth rate of employment has slowed from 223,000 per month in 2018 to 158,000 in the last three months.
Overview: the resistance observed in the September labor report will increase hopes that the economy can avoid a recession. Although manufacturing activity and business investment have been weak, consumer spending has remained well.
Many economists say that the employment report is a lagging indicator and will be attentive to the readings over the next few months before giving a “clear” signal to the economy.
Also today, oil prices are trying to rise. The increase in quotations is supported by statements by the Minister of Energy of Saudi Arabia, Prince Abdulaziz bin Salman, that the world’s largest exporter of crude oil has completely restored oil production after the attack on Saudi Aramco refineries. In the evening, the publication of the Baker Hughes report on active oil platforms in the United States of America is forecasted. Previously, the number reduced from 719 to 713 units. Continuation of the trend may support the prices.
USD is moving horizontally against JPY, weakening against EUR and strengthening against GBP.
Investors are focused on the publication of September data from the US labor market, which was ambiguous. The unemployment rate fell from 3.7% to 3.5%. The August Nonfarm Payrolls index was revised upward from 130 to 168K, and in September it amounted to 136K. On the whole, the American labor market does not look so poor, and it allows the Fed to take a wait-and-see attitude and hold off with new measures to support the economy.
In the evening, Jerome Powell, and then a number of senior members of the American regulator will speak in Washington at the Fed hearings on the prospects for maximum employment and price stability. They can shed light on the further actions of monetary authorities. It is not clear either the Fed will continue to cut rates, as required by President Donald Trump, or take a wait and see attitude.
EUR today is moving horizontally against JPY and is strengthening against USD and GBP.
Due to a lack of significant European economic releases, traders are focused on Brexit. British Prime Minister Boris Johnson’s new plan to move away from the tough Irish border has caused mixed reactions from European officials. The desire of the British government to conclude a deal was welcomed but the plan itself caused a lot of complaints. Thus, the Prime Minister of Ireland, Leo Varadkar, expressed doubt that Northern Ireland and the Republic of Ireland will be able to interact, being within two different customs systems. According to Bloomberg, EU chief negotiator Michel Barnier noted in a private meeting with European diplomats that Johnson’s plan does not match his vision of the deal. Nevertheless, the parties agreed to hold new intensive negotiations over the coming week, and it should determine the fate of the transaction.
GBP is weakening today against its main competitors – EUR, JPY, and USD.
EUR is under pressure of the reaction of European officials to Boris Johnson’s new proposals on the Irish border. Brussels endorses London’s willingness to compromise but has a host of questions for British proposals that need to be resolved in the course of new negotiations. Yesterday, the new draft agreement was submitted to the British Parliament and may well be approved. According to the Telegraph, some 25 opposition deputies are ready to join the Conservative Party and support Johnson’s plan. If he is not accepted by the British deputies or rejected by the EU, the Prime Minister threatens Britain with leaving the EU on October 31 without a deal, even despite the legislative ban on this action by Parliament.
JPY today is strengthening against GBP and moves horizontally against USD and EUR.
Japanese investors are focusing on today’s comments by Prime Minister Shinzo Abe and Finance Minister Taro Aso. Abe promised to take all possible steps to support the economy if an increase in sales tax leads to its decline. Experts believe that the prime minister had in mind the possibility of tax incentives. However, Finance Minister Aso told reporters that there is currently no need for new incentives.
AUD is now strengthening against its main competitors – EUR, GBP, JPY, and USD.
The strengthening of AUD was due to good economic statistics. In August, retail sales in Australia grew by 0.4%, although they did not reach the forecast of 0.5%. New home sales rose immediately by 7.3% after falling 7.2% a month earlier. Experts attribute the increase in indicators with the positive effect of the decrease of the RBA interest rates.