US Jobs Report, Oil, Gold, USD

US jobs report to show fears are overhyped?

It’s been an action-packed week in the markets, particularly over the last couple of days and fortunately, that’s not letting up today.

The US jobs report is arguably the most important and widely followed economic report each month and this month is no different. It’s been a weird year so far when it comes to the jobs report, with the government shutdown likely being responsible for playing havoc with the data. That appeared to have settled down last month, with job creation being more in line with the norm and unemployment and wage growth being back on track.

We’re expecting another strong report this month – unemployment 3.8%, 180,000 new jobs and 3.4% earnings increase – which begs the question, is the economy really as vulnerable as so many seem to fear? The Fed may have come around to the idea that the risks are mounting and the inverted yield curve may well have given it the creeps but they’re not yet bowing to the idea that rate cuts are warranted.

How low will oil go?

It's been a pretty woeful week for oil prices, now off more than 5% from last Friday's peak and showing little sign of letting up. Trump may be able to claim responsibility for this correction - with his bizarre claims last week that he'd spoken with OPEC undoubtedly being the initial catalyst - but the reality is that this was already a very overbought market that just needed a nudge in the right direction and the inventory data we've seen this week just compounded that. Perhaps that was Trump's real intention all along.

Now it's simply a question of how big a correction we're facing and whether recent moves will knock the confidence of oil bulls or has presented an opportunity to add at cheaper prices. The fundamentals are clearly a mixed bag. On the one hand we have record US output and slower growth. On the other, Iranian waivers have now expired and OPEC+ compliance with the output cut has been strong. One unknown is whether that continues beyond June. Perhaps current levels are pretty adequate under the circumstances.