Markets, NFP, Trade Talks, Brexit, Gold

Mixed start ahead of jobs report

It’s been a mixed start to trading on Friday, as we await the latest jobs report from the US.

US futures are marginally higher but we have lost a little momentum. That may simply be because we’re awaiting the latest labour market data from the US, a report that is arguably the most closely followed each month. It also comes after a dreadful month of job creation in February when only 20,000 were added, although the data has been very inconsistent since the shutdown and another revision may come today.

Broadly speaking the labour market remains very strong and the economy, while slowing, is very healthy. With unemployment running at only 3.8% and wages rising at 3.4% annually, there’s clearly nothing to worry about just yet. That said, the US is not immune from the global slowdown and investors will only accept weak job growth for so long. It will be interesting to see what happens today if we get another bad reading, especially if it isn’t accompanied by a big revision to the February number. The market is not expecting this though, with around 180,000 forecast.

The greatest threat to the economic outlook remains the trade war between the US and China. While we have seen clear progress in recent months, the last part of the negotiation is expected to be the most difficult and drawn out. Trump remains optimistic about a deal but less confident about the timing.

May requests more time

I’m not sure what the public fear more, an potentially indefinite backstop or indefinite negotiations. Theresa May requested another short extension from the EU on Friday to get a Brexit agreement through Parliament, as she continued to engage in talks with the opposition Labour Party.

It seems there are differences though between what May deems to be an acceptable extension and what Tusk believes it to be, which is much longer, albeit flexible. This will likely be discussed at the emergency EU summit next Wednesday, with the default remaining that the UK leaves without a deal on 12th April, one week from today.

Gold remains weighed down by USD

The dollar may be trading a little softer today but another strong day on Thursday is keeping the pressure on gold which has been weighed down by it over the last couple of weeks. It remains above $1,280, a major support level, a break of which could be the catalyst for another significant decline, with $1,260 being notable support below.

The dollar is always vulnerable to the release of the US jobs report so today could bring volatility for gold also. Gold has also been weighed down by improved sentiment in the markets so a strong jobs report today could see $1,280 come under real pressure.