However, Ms Yellen has already stated that she believes that the US labour market is not as strong as headline numbers indicate, confirmed by a steady decline in the participation rate which currently stands at 62.9% – its lowest level since 2004. As a result, markets have seemingly called her bluff and have begun to temper expectations of a rate hike, which has seen a decline in interest rate futures.
The bullish move in the US dollar, which has seen the currency index gain 10.9% since its May low, seems more to do with the levels of discomfort the market has with a global deflationary environment. This has since been exacerbated by a continuously bearish market in commodities, thus calling global growth into question and resulting in a flight to safe havens, as the US continues to emerge as a market leader. The previous GDP number was posted as 3.5% quarter-on-quarter, beating expectations of 3%.
In equity markets, the US 500 has tapered off from its 27 November high of 2076, seeing its relative strength index reading moving back into expansionary territory. If expectations are met, this is likely to result in the US equity bull market aiming to post a fresh record high. Intermediate topside targets appear at 2103.4.
Should the number disappoint, it’s not likely that there will be an all-out bearish move to the downside, given the overriding bullish trend in the wider macro data; instead a re-testing of a previous level of resistance-turned-support could be in play, at 2042.3.
As always it pays to focus not just on the headline number, but also on any revision to the previous number.
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