Robust Employment Data Bolsters US Stocks

The US employment sector remains resilient to the highest interest rates in 16 years. The Unemployment rate again declined to 3.4%, the lowest we have seen since February. Economists expected the unemployment rate to increase from 3.5% to 3.6% rather than decline. The Non-Farm Payroll increased from 165,000 to 253,000, which is also higher than the expected 179,000. Lastly, the average hourly earnings for April show a 0.5% increase, which is exceptionally high. 

As a result, the US Dollar initially saw a substantial decline, measuring almost 0.40%. However, the US Dollar corrected back upwards shortly afterward. The US Dollar Index this morning is again declining, approaching the 101.00 level. Traders should note that the 101.00 is a solid psychological level for investors and can act as a strong support level or an indication for potentially driving the Dollar further down. Investors may note that the robust employment data is known to be positive for the US Dollar and for the monetary policy. However, employment data is a lagging indicator. Therefore, it is “too late” if the data is deteriorating. The Federal Reserve will price the federal fund rate at a level they believe will pressure but not derail the economy. Therefore, the employment data does not necessarily mean higher interest rates. This is one of the reasons why the Dollar has declined. 

So the US Dollar has not shown bullish solid price movement, but the US stock market has. The NASDAQ saw the strongest price movement, like most of 2023. The NASDAQ grew by over 2%, its best performance since April 27th. The Dow Jones saw the weakest price increase, growing 1.45%. European equities indices increased Friday and during this morning’s European market open. 

GBP/USD - US Employment Data Fails to Support the Dollar, but Investors Turn to Inflation

The market expects today’s trading session to show slightly lower orders due to the UK’s bank holiday and no significant economic data scheduled for the next two days. However, investors will be preparing for Wednesday’s Consumer Price Index. The employment data is not likely to push the hand of the regulator; however, if we get an inflation surprise, the committee may have to relook at their stance. 

Wall Street expects the Consumer Price Index to read 0.4% and the yearly inflation to remain at 5%. If the data comes in at more than 0.6% and inflation increases, the Federal Reserve may consider another 0.25% hike, which will also depend on the Producer Price Index and the PCE Price Index. If the figure comes in at 0.6% or above, market participants will turn their attention to Federal Open Market Committee members for signals. Economists expect the Core CPI figure to read 0.4%.

GBP/USD 4-Hour Chart on May 8th 

Investors will also monitor the Bank of England’s rate decision on Thursday. It is almost certain the monetary policy decision will be to increase the bank rate from 4.25% to 4.50%. However, investors will concentrate on the Governor's signals at the press conference and the monetary policy committee’s votes. Citibank and HSBC have already advised the BoE will hike, but they are positioning themselves against further rate hikes.

The exchange rate has increased to a new price high for 2023 after the asset increased for five consecutive days and four consecutive weeks. Investors are cautious that the capital flow into the UK today may decline due to the bank holiday. This morning's price is moving in favour of the US Dollar after the opening of the European trading markets. Technical indicators are currently indicating an upward trend and a downward retracement. However, if the downward price movement continues, the indication may change. 

SNP500 - Robust Employment Data Bolsters US Stocks

The SNP500 grew by 1.85% after the release of the US employment data. However, the bullish price movement is also in response to positive earnings data from various companies. However, investors have their eyes fixed on Apple more than any other company. Apple holds the highest “weight” amongst all competitors, holding 7.26%. The price of Apple increased by more than 4.60% due to beating economists’ earnings expectations. The second most influential stock is Microsoft, which grew a moderate 1.70%.

The robust employment data positively influenced the stock market, which shows the economy is resilient and potentially not as close to a recession as initially thought. The data indicates consumer demand may also remain high as inflation slows, earnings increase, and more individuals gain employment. The Average Hourly Earnings also showed an extremely high figure of 0.5%.

SNP500 30-Minute Chart on May 8th 

The SNP500 remains close to the previous resistance levels from August 2022, December 2022, and February 2023. The index has recently shown signs of weakness and “sellers” within the market. However, indicators are currently signaling bullish price movements, which can become even more potent if the instrument can increase above $4,151.

Summary:

• The US Dollar declines after the latest US employment data and during this morning's Asian session. However, it rose slightly after the opening of the European trading session. 
• The US Dollar Index this morning is again declining, approaching the 101.00 level. This can act as a support level or may drive a decline if the price breaks below this price.
• The NASDAQ saw the strongest price movement, like most of 2023. The SNP500 grew by 1.85% after the US employment data and various earnings reports were released. 
• Investors will now turn their attention to this Wednesday's inflation data.