266,000 jobs were created in the United States in April instead of the one million expected by economists! The employment figures published this Friday across the Atlantic were a huge surprise, causing the dollar and US sovereign interest rates to fall.
The greenback was undermined by disappointing U.S. jobs data, which suggested the economic recovery is uneven and not quite as strong as hoped, and that the Federal Reserve will not reduce its support for the markets for an extended period.
“This is a big surprise,” said Matt Maley, director of market strategy at Miller Tabak & Co, “It's going to throw a big wrench in the big rotation we've seen recently. The drop in the U.S. 10-year yield will hurt banks and help tech. It should also cause some problems for commodities, which have rallied very strongly in anticipation of higher inflation.”
Despite the solid recovery of growth across the Atlantic, about 8.5 million of the approximately 22 million jobs destroyed last year by the coronavirus crisis have not yet been recreated, while full employment is one of the main mandates of the Fed, with annual inflation of about 2%.
On the bond markets, rates were very volatile after the announcement of the employment figures. They initially fell before recovering. The yield on the 10-year U.S. T-Bond fell to 1.47% after the announcement of the employment figures (compared to 1.57% on Thursday evening) before returning to 1.57%. The rate of the “30 years” fell to 2.15% (against 2.24% Thursday night) before rising to 2.27%.
(Chart Source: Tradingview 09.05.2021)
On the flip side, a bullish rebound could see the DXY move closer to the 0.786 Fibonacci retracement level around 90.50. Traders may play off the support recovery pattern and enter long positions at this price point with stops around 89.95 level.
Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.