- The US economy has gained 339,000 jobs in May, far above 190,000 expected.
- Wage growth has moderated to 4.3% YoY, marginally below estimates.
- The hurdle for raising rates this month is higher, implying fresh US Dollar falls.
Is the US economy experiencing a soft landing? According to the latest Nonfarm Payrolls, the job market is slowing down to a "Goldilocks level" – not too hot nor too cold. For markets, it means continued growth, but with lower inflation and interest rates. For the US Dollar, it means the path of least resistance is down.
The US gained 339,000 jobs in May, far above 190,000 expected – but that is only one part of the story when it comes to the Federal Reserve. The participation rate held at 62.6%, but labor shortages seem to be less of an issue. Moreover, annual wage growth slowed to 4.3% YoY, lower than expected. Inflation pressures are cooling.
Hiring is high, but inflation may drop – that is how Goldilocks looks like.
Until several days ago, the hawks at the Fed seemed to have the upper hand, pushing for yet another rate hike in the upcoming June meeting – and perhaps another one. Phillip Jefferson, Vice-Chair of the Federal Reserve, changed the picture by leaning toward "skipping" further tightening this month. He was joined by several dovish peers, tilting the playing field in favor of a halt.
The Consumer Price Index (CPI) report is the last major data point before the bank's decision, but it is unlikely to change the picture. May's Nonfarm Payrolls and the bank's tendency to pause – echoed also by Fed Chair Jerome Powell – all point to halting hikes.
As bond markets do not fully price this option, there is room for further softening for the US Dollar alongside returns on US debt. In turn, falling yields mean fresh gains for Gold.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD holds steady at around 1.0750 ahead of this week's key events
EUR/USD continues to trade sideways at around 1.0750 on Monday. The cautious market mood helps the US Dollar (USD) hold its ground as investors gear up for key macroeconomic data releases and central bank meetings of this week.
GBP/USD retreats toward 1.2550 from daily highs
GBP/USD lost its traction and retreated to the 1.2550 area after rising toward 1.2600 in the European session. October labor market data from the UK and November inflation data from the US will be released on Tuesday ahead of the Fed's and the BoE's policy meetings.
Gold extends daily slide toward $1,980 Premium
Gold price remains under heavy bearish pressure and trades at its lowest level in nearly three weeks at around $1,980. The benchmark 10-year US Treasury bond yield is up more than 1% on the day, weighing on XAU/USD ahead of this week's key macroeconomic events.
Bitcoin price backtracks to $40,000 as whales move to sell $671 million worth of BTC
Bitcoin price crashed on Monday for the first time in nearly three weeks. The market was expecting a bullish continuation until the Securities & Exchange Commission (SEC) approves a spot BTC ETF in January 2024.
Big week ahead for commodities with FOMC, ECB and BOE in focus – What's next?
The most highly anticipated week of the year and quite possibly the most pivotal moment in monetary policy history is finally here – as central banks from Washington to Frankfurt to London and beyond prepare to deliver their final interest rate decisions of 2023.