Advertisement
Advertisement

U.S. Non-Farm Payrolls Report Raises Odds for September Rate Hike

By:
James Hyerczyk
Updated: Aug 7, 2015, 15:52 UTC

The U.S. Non-Farm Payrolls report was the key news event on Friday. It was important enough to trigger responses in multiple markets including the foreign

U.S. Non-Farm Payrolls Report Raises Odds for September Rate Hike

The U.S. Non-Farm Payrolls report was the key news event on Friday. It was important enough to trigger responses in multiple markets including the foreign currency, precious metal, interest rate and stock index sectors.

FEDERAL RESERVE

The jobs report showed non-farm payrolls for July at 215,000. This was below the 222,000 estimate, but within the range. The markets acted as if it wasn’t a surprise which could mean that investors believe the Fed has enough information to begin raising rates in September.

Additionally, the unemployment rate was unchanged at 5.3 percent and average hourly wages grew modestly at 0.2 percent, or 2.1 percent on a yearly basis.

Although the initial reaction suggested the Fed could be ready to hike, there are still some investors who feel the central bank wants to be sure before making a move so it may skip a rate hike in September on the hopes that the labor markets continue to show improvement. Based on this assessment, the odds of a September rate hike shifted to 55 percent, from 47 percent before the jobs report, and the first full rate hike is priced into December.

Some investors believe the Fed is putting more weight on wages rather than the payrolls number. If this is the case then it may wait beyond September. Additionally, the central bank may also be factoring consumer inflation into the equation.

Today’s report was good enough to send Treasury yields higher. This helped drive up the U.S. Dollar, pressuring December Comex Gold, the Euro and the British Pound. The initial reaction may have been to the downside for gold, the EUR/USD and GBP/USD, however, if traders feel there is still doubt about a September rate hike, then there may be a late session short-covering rally.

In other news, German Industrial Production fell unexpectedly by 1.4%. Traders were looking for a reading of 0.3%. German Trade Balance came in at 22.0 billion versus an estimate of 23.2 billion. The U.K. Trade Balance was -9.2 billion versus an estimate of -9.1 billion.

September Crude Oil futures reached a new multi-month low today on supply concerns. This week’s Energy Information Administration report may have shown a drawdown, but U.S. production rose to 9.5 million barrels per day. This figure combined with OPEC’s output paints a bearish picture for the market. Later today, Baker Hughes, Inc. will release its latest rig count. The count has risen the past two weeks which is another bearish factor.  

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement