The global focus was on US employment data this week as the US Fed’s data dependent policy has meant that investors have increasingly turned more short-term orientated in their decisions.
Some Fed members spoke during the week, causing nervousness ahead of the release of the US non-farm payroll data as they stressed that the next June meeting remained an open meeting whether rates will be hiked or not.
The market was only pricing in a 10% probability of a rate hike in June and if today’s payroll data did surprise to the upside, then many investors would have been caught off-side. But actual non-farm payrolls for April came in lower than expected at 160,000 – the lowest reading since September 2015 and below consensus forecasts of 200,000.
The unemployment rate held steady at 5%. This followed on employment data released earlier this week which showed that unemployment claims rose and that private sector employment increased by less than expected. With employment data being such a key determinant of US interest rate policy, the recent softness might j ust mean that the Fed holds off with a June rate hike.