US non-farm payrolls smashes estimate

The dollar surged and there was a decline in gold and the US indices after the impressive non-farm payrolls. 

American flag
Source: Bloomberg

The dollar has been given a second wind on the back of the latest non-farm payrolls which came in at 280,000 in May. This was well ahead of the 226,000 expected by the market.

It has been a great week for US jobs reports, as the ADP, jobless and now the non-farm payrolls report all exceeded analysts’ estimates. Other economic indicators out of the US recently haven’t been too impressive, but today’s report has jolted the greenback higher. There was growing speculation that the Federal Reserve would not raise rates until 2016, but today’s number is evidence that an interest rate hike this year can’t be ruled out.

Gold is feeling the pressure of a strong dollar, and the impressive jobs number is a signal that the US central bank is looking to move away from near-zero rates within the next year. Gold is losing its edge as it is non-interest bearing, and the healthier the US economy is the more it will suffer.

Wall Street and the US 500 both were pushed lower by the prospect of interest rate rise this year, but the move is relatively small in comparison with the collapse in gold and the surge in the dollar. 

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.