Non-farm payrolls smash estimates

US non-farm payrolls smashed estimates and came in at 295,000 in February against the 235,000 expected, and this is a healthy jump higher from the 239,000 in January – last month’s report was revised lower from 257,000.

People at a job fair
Source: Bloomberg

The unemployment rate tumbled to 5.5% last month and slightly below the estimate of 5.6%. There is no question the headline figures are impressive, but when you drill down into the report the average hourly earnings marginally slipped on the month, along with the participation rate, and these are the sort of details that will prevent the Federal Reserve from rushing into an interest rate hike too soon.

Janet Yellen is content to keep rates on hold for at least the next two Fed meetings and today’s report will justify her cautious stance, but there will be some Fed members who will be pressing for a rate increase in June.

US central bankers may be divided over when rates should rise, but the markets are certainly pointing to an increase sooner rather than later. The biggest reaction was in the dollar which powered ahead on the back of the announcement, while EUR/USD slumped to new multi-years lows as the quantitative easing scheme launched by the European Central Bank yesterday is still fresh in traders’ minds.

GBP/USD dropped to its lowest level in a month as the US extended its lead over the UK in the race to raise rates. Indices like the Dow Jones and S&P 500 dropped in the wake of the announcement, but both sets of US index futures are off the lows of the session.

US light crude and Brent crude were knocked back by the strength of the greenback, but both energies are no stranger to trading lower.

Gold is in trouble as today’s jobs report puts the hawks among the doves, and the metals’ non-interest bearing ability is holding it back.

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