Painful NFP report crumbles March hike expectations

Sentiment towards the US economy has received another crippling blow following an unexpectedly weak NFP report of 151k, which as a headline number appears to have further dashed remaining hopes foranother US interest rate rise for March. The surprisinglyweak results might also raise alarm bells inthe United States because job creation has been one area of the US economy that has performed strongly, and which hadled to optimism thatinterest rates would be hiked in the first place.

What is important to take into account in the mid-term is that aside from an unexpectedly poor headline number of jobs created, the unemployment rate has dropped to an eight-year low at 4.9% and there has actually been some growth in wages over the previous month. Wage growth at 0.5% is better than what was expected at 0.3% and might actually improve the prospects for inflation, which is one area of the US economy that the Federal Reserve are continuously monitoring. Nevertheless, the mixed employment report adds to the recent string of negative data released from the United States, which is encouraging suspicions over whether it was the right move for the Federal Reserve to finally raise interest rates last December.

Like the jobs report, the reaction to the USD after the NFP result is mixed. In the bigger picture, the elevated anxieties over slowing global growth, depressed commodity prices has exposed the US economy to downside risks and we are beginning to regularly notice that US economic momentum is slowing. The weak headline jobs report has hardly improved expectations over the Federal Reserve raising interest rates in March, which means that Dollar weakness might continue to take center stage as investors continue to push back US interest rate expectations.

With any remaining expectations around the possibility of a US rate hike in March or 2016 dismissed, Gold bulls salvaged this opportunity to drive prices to fresh 4 months highs at $1162. This yellow metal is bullish and the risk-off trading environment complimented with Dollar weakness may provide a foundation for bullish investors to send prices towards $1180 and potentially higher. From a technical standpoint, previous resistance at $1160 may transform into a dynamic support which should encourage a further incline towards $1180.

Overall, today’s NFP’s results has thrown up some tricky questions about the progress being made in the US economy, and alongside slowing global growth, this has consequently dimmed any hopes around the Fed increasing interest rates once again. Most other central banks have already adopted a negative rate policy and if this pain of falling commodity prices and heightened anxieties over global growth continues to punish the US economy, then the Fed may swallow their pride and postpone any ideas around raising interest rates once again altogether.