© Reuters
Investing.com – Key employment data in the United States was released today, Friday, revealing the addition of 199,000 jobs, while Wall Street expected the addition of only 180,000 jobs. The unemployment rate also stopped at 3.7%, down from 3.9%, while average annual wages rose 4%. What has changed in the Fed’s vision and interest expectations?
What is the relationship between employment and inflation?
US Federal Reserve Chairman Jerome Powell revealed that employment data is one of the most important drivers and indicators of a rebound in inflation. Which means that the rise in wages, the lack of balance in the labor market, and the addition of jobs mainly reflect on the purchasing power of citizens in the United States, which threatens the US Federal Reserve’s efforts to achieve monetary tightening and decline in inflation.
How have interest expectations changed yet?
Immediately after the release of employment data that was more positive than Wall Street experts expected, interest expectations changed in tandem. Experts now see less opportunity for monetary easing in 2024. This means that expectations for the size of the interest rate cut in 2024 have decreased. This was directly reflected in the prices of near-term Treasury bonds, which fell strongly in the first hour following the release of the employment data (and yields rose).
How did the US government comment on the data?
US President, Joe Biden, said that he is proud of the strength and flexibility of the US economy. However, he stressed that the greatest priority for the government and the American economy is to reduce costs. This indicates a reduction in inflation.
What can you tell us from Investing.com?
Investing data reveal that the Fed will tend to maintain the interest level in the range of 5.25% – 5.50% at the December (13) and January (31) meetings.
45.6% expect the interest rate cut to begin on March 20, and the cut will begin at 0.25%, bringing interest rates down to 5.25% from 5.5%. While 49.8% believe that the Fed will not begin the cut in March, and that the first cut will take place at the May meeting (1).
How much will the interest be by the end of 2024?
The US Federal Reserve’s monitoring tool reveals a significant difference in interest rate expectations by the end of 2024, as 28.7% believe that the interest rate will fall to 4.25%, which means a reduction of 125 basis points in 2024.
As for 27.5%, they expect the reduction to stop at 100 basis points in 2024 and the interest rate at the end of the year to reach 4.5%.
How do markets move after the data?
Gold prices were strongly affected after the release of the data, losing more than 1%. Spot contracts fell 1.14% to trade at $2,005.4 an ounce at the time of publishing the article.
It fell by 1.26% to $2020.65 per ounce.
While the US dinar index rose to 104.037 against a basket of foreign currencies.
Yields rose strongly following the data, as 2-year Treasury bond yields rose by 3.07% to 4.721%. While 10-year Treasury bond yields rose by 3.3% to 4.259%.
While the US market indices moved sideways, falling by 0.1% to 0.02%, and the Nasdaq by 0.08%.
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2023-12-08 16:49:00
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