Analysts from Lloyds Bank point out that today’s US employment numbers show a solid report even with the rise in the unemployment rate, indicating that markets become too negative about the outlook for interest rates.
“Overall this is a solid report even with the rise in the unemployment rate. Indeed as that increase was due to a rise in labour market participation rather than a fall in employment it can also be seen as a sign of a healthier labour market.”
“The big picture is that employment gains of recent months are more than strong enough to lead to a further decline in the unemployment rate this year, unless labour market participation keeps moving up sharply. The tightening labour market is likely to boost wage growth.”
“In short, this report is an indication that markets have become too negative about the outlook for US interest rates. The next FOMC meeting later this month is unlikely to see any change in policy as the Fed awaits further evidence of improving conditions in financial markets and the real economy. Nevertheless, we still expect the Fed to raise interest rates later this year as it becomes clearer that the economy remains strong and inflationary pressures are building.”
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