Do the US labor market data support the Federal Reserve’s decision to raise interest rates strongly?

The currency markets will follow with great interest the issuance of the US labor market data during last February, which will have a very strong impact on the US dollar trading against other currencies, in addition to its expected strong impact on the stock and metal markets such as commodities and digital currencies, on top of which is Bitcoin. Here is a look at the upcoming data and how Affecting dollar trading:

First: A look at the US labor market during last January:

The US labor market data came positive during last January, as the economy added about 517 thousand jobs, while it was expected to add about 193 thousand jobs only, after the economy had added about 260 thousand jobs last December.

At the same time, unemployment decreased to around 3.4% in the same period, better than market expectations, which indicated a rise to 3.6%, and better than the previous reading, which recorded about 3.5% last December. While wages recorded a growth of 0.3% during the same period, in line with market expectations, but it is lower than the previous reading, which showed wage growth of 0.4% during last December. This data had a strong and clear impact on the dollar against other currencies.

A very positive surprise for the dollar due to the US labor market data

Second: Evidence for the upcoming US labor market data:

During the previous period, many economic data were issued that may give an indication about the performance of the US labor market data during last January, as the data was remarkably positive, and therefore this may have an impact on the US labor market data expected to be issued. The following are the most important of these indicators:

The US Unemployment Claims Index: It showed great positivity during last December, as the data issued by the US Labor Statistics Bureau over the past four weeks revealed that most US unemployment claims were stable near the level of 200,000 requests, but the relief requests witnessed a slight increase during last February compared to January. In the past, which might give an impression of starting to damage the labor market, albeit slightly, by raising the interest rate.

Urgent… US unemployment claims are very negative for this week!

On the other hand, data from the US Bureau of Labor Statistics showed positive employment data in the US private sector during the month of February, as the data showed that the jobs of the US economy in the non-agricultural sector increased by about 242 thousand jobs during that period, better than market expectations by adding 197 thousand jobs. . It is also better than the previous reading, which recorded only about 119,000 jobs in January.

Urgent – US private sector jobs explode markets before Powell’s testimony resumes

Third: Market expectations regarding the US labor market data:

Market expectations indicate that accelerating the pace of interest rate hikes may have a negative impact on the US labor market data. According to expectations, the US economy is likely to add about 224,000 jobs only. Expectations also indicate a wage growth of 0.3% during the same period, in addition to the stability of unemployment at the level of 3.4% at the end of last February.

Fourth: Possible US labor market scenarios and their potential impact on the dollar:

At the present time, the US dollar index is settling at the highest level of 105 points, benefiting from the issuance of some positive economic data and the state of optimism about the rise in the final interest rate in America to levels greater than expected, and therefore the US dollar is waiting for the release of US labor market data to give it more strength. during the coming days.

The first scenario is positive US labor market data And to come better than expectations, as the economy adds many jobs, unemployment decreases below the level of 3.4%, and wages grow at a very strong pace, and this positive scenario for the labor market data may raise the dollar index towards the level of 106 points, and it may head towards the level of 107 points and higher than that, Because this scenario will give the US Federal Reserve greater flexibility with regard to continuing to raise interest rates during the March meeting, and may enhance the prospects for raising interest rates by about 50 basis points during this meeting, and on the contrary, both gold and digital currencies will be affected by the expected rises in the dollar.

While the second scenario is represented in the negative data of the US labor market And for the economy to add jobs less than expected and for unemployment to rise above the level of 3.4%, and in this way, the dollar may decline near the level of 104 points again and may fall towards the level of 102 points or less, because this scenario will make the Fed fear the repercussions of raising interest rates and await the issuance of data The upcoming inflation until it takes a decision regarding the pace of interest rate hikes, but the negativity of this data may give the Fed a green light to raise interest rates by about 25 basis points only, and confirm the correctness of its path with regard to slowing interest rate hikes, and this will have a negative impact on the dollar and positively on gold, stocks and currencies. digital.