At 16:30 Dubai time, U.S. labor market data is set for release. These figures are considered one of the most important data points that affects the Fed’s decisions future monetary policy decisions. The Fed indicated in its previous meeting that it will closely monitor labor market data, which in turn, will direct the course of monetary policy.
With inflation still above the Fed’s target, will today’s jobs data support the central bank’s decision to keep interest rates higher for a longer?
Expectations suggest that the U.S. economy added 238,000 jobs in March compared to the previous month’s 303,000. If expectations are correct, this would indicate that the labor market has started taking the negative effects of the Fed’s policy, potentially pushing the central bank to start lowering interest rates. However, if the reading turns out lower than expected and lower than the previous reading, this may prompt the Fed to keep rates high for longer than previously expected.
Expected scenarios and their potential market impact:
- Higher than expected and previous reading: This scenario may support the Fed’s current decisions not to lower interest rates. Analysts expect this to have a positive impact on the U.S. dollar while negatively impacting on gold and stocks.
- Lower than expected and previous reading: This may justify the Fed reducing interest rates in its upcoming meetings or ruling out any further hikes. Therefore, analysts expect this to negatively affect the US dollar and positively impact gold and stock prices.
- Between the previous and expected: This reading would be the most confusing for markets, making it difficult to predict specific price movement.
Note that the initial market reaction, regardless of the nature of the actual reading, may be sharp and volatile before the market begins to return to stability. Therefore, traders should remember that people have different ideas and convictions in the way they interpret the information issued, and therefore prices cannot move 100% according to this information.
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