Volatility has remained generally high in many markets this week as trade wars between the USA and other countries could continue to escalate. The US dollar has remained generally strong while gold gained sharply to reach new highs. This article previews 7 February’s job report and looks briefly at the charts of EURUSD and USDJPY.
After two unusually positive NFPs in December and last month, this release is expected to be somewhat weaker at around 170,000. Unemployment might hold at 4.1%. Overall the impression of a good job market in the USA is unlikely to go away in the near future. Meanwhile the earliest majority expecting at least one cut by the Federal Reserve (‘the Fed’) is for June at slightly more than 60% according to CME FedWatch.
American tariffs of 25% on Canada and Mexico and 10% on China launched last weekend but so far there’s no confirmation of tariffs on the EU or UK. China reacted to the news by imposing its own new charges on various products. These developments had been quite widely anticipated for a long time, so their ongoing impact on volatility isn’t necessarily going to be very large, but traders are looking out for news of other countries’ reactions and companies’ updates to supply chains.
Looking further ahead to next week, American inflation is a key release which might have some impact on expectations for the funds rate this summer. Given the recent trend of rising inflation, one might expect annual headline inflation to have risen again, but the result from the NFP might give more clues about this.
