After weaker-than-expected JOLTs and ADP numbers, and while initial Jobless claims again rose above 200K up to 220,000 applies, Mixed NFP data changed the market sentiment. The US March seasonally adjusted Non-Farm payrolls at 236,000, missed the market expectations of 239,000. This is while the previous month’s number was revised to 326,000 from 311,000.
With moving under the 6-month average of 334K, NFP numbers confirmed the slower pace of labor market growth. However, with the unemployment rate falling back to 3.5% and the 62.6% participant rate, we cannot say that the job market is weaker than it should be.
Based on these mixed numbers, the CME FedWatch tool shows more than a 70% chance of another 25 basis points rate hike by FOMC in its next month’s meeting, compared with less than 50% of a day before and a week ago.
This week, market participants will focus on US CPI data. If the data shows that inflation is still high, the market’s expectations for the Fed to raise interest rates by 25 basis points will further heat up.
Last week, the US dollar lost strength on diminished rate hike expectations, and the USD index fell under 102. US Treasury yields also were volatile last week, with the US 10-year bond yields dipping from 3.54% to 3.27% mid-week, before paring some losses at the end of the week, closing near 3.40% on Friday and moving above 3.42% on Monday.
In the week ahead, we are waiting for high volatility days in the US dollar chart as market participants will focus on US inflation data. US Consumer Price Index in March is forecast to decrease to 5.2% year-on-year, down from 6.0% in February. However, on a monthly scale, it is expected to rise by 0.3%, after 0.5% and 0.4% growth in January and February, respectively. Core CPI will get more attention, as with slower energy prices, investors will be interested to see the market condition, excluding volatile energy and food prices. PPI data on the 13th will shed more light on the US inflation outlook. Any signs of cooling price pressures may tip the odds in favor of a pause in rate hikes, which will decrease the US dollar and lift the stocks and vice-versa.
From the technical point of view, we can see strong support at 101.30 and resistance at 105.80. For now, side movement for a while will be expected between these levels until we have a more convincing reason for an upward or downward trend. Overall, market sentiment supports the bears for the next trend. However, it is not a definitive opinion.