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Daily Wrap Up 8 October 2021

8 Oct 2021 04:51 PM

Dollar slips post surprising US jobs report 

The FTSE 100 is outperforming the major indices in the eurozone thanks to its relatively large exposure to oil and gas stocks, such as BP and Royal Dutch Shell. Oil’s powerful run this week gave a helping hand to the energy sector, and in turn the major British index. Continental markets are a little lower as we approach the end of the day.

The US non-farm payrolls report caught many traders by surprise as the update showed that only 194,000 jobs were added in September, which was nowhere near the 500,000 that economists were expecting. Keep in mind, the lower end of the estimate was 250,000, so that really highlights the shock. As is often the case in with the update, the markets had a knee-jerk reaction to the headline number, but the other aspects of the update were well received, so that changed the perception of the announcement. The August reading was revised from 235,000 to 366,000, and the unemployment rate fell from 5.2% to 4.8% - the lowest mark since the pandemic began. All in all, it was a mediocre report. Now that the jobless level is below the 5% mark, there is bound to be chatter about the Federal Reserve tapering their bond buying scheme in the next few months. At the same time, the previous two non-farm readings have been disappointing when compared with the levels seen during the summer, so there is also an argument that job creation is fading and therefore the existing asset stimulus scheme should be kept in place.

Now the dust has settled in the wake of the jobs report, the reaction from the markets has been that it was a below par update. The S&P 500 and the NASDAQ 100 are showing modest gains as dealers have taken the view that bad news for the labour market, is good news for equities, because the Fed might seek to stay the course with respect to their asset purchase scheme. The US dollar index is down 0.15%, which is propping up EUR/USD and GBP/USD. Last week, the dollar hit a 10-month high, and earlier this week it came close to retesting that metric, but it turned lower as a reaction to the jobs data. USD/CAD is down 0.6% thanks to a robust set jobs numbers from Canada. The employment change came in at 157,100, easily topping the 59,500 forecast, and the unemployment rate fell to 6.9%. Gold has had a mixed session as it hit a two-week high by trading above $1,780 but it has moved lower in the past few hours.

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