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As reported last Friday by the US Department of Labor, the average hourly earnings rose by 3.1% in October compared with the same period last year. This is the highest annual earnings growth since 2009. Unemployment in October remained unchanged, at the level of 3.7%. This is the lowest level since December 1969. The number of non-agricultural jobs increased by 250,000 in October. Economists had expected that the number of jobs in October increased by 188,000.
The US dollar continued to strengthen last week after the publication of the minutes from the September Fed meeting, according to which the US central bank is going to continue to raise interest rates. The Fed signalled the possibility of another rate hike in 2018 and three raises in 2019. Higher interest rates usually increase the demand for national currency. The dollar also receives support due to faster economic growth in the USA, than in other countries.
Negotiators from the UK and the EU over the weekend could not agree on measures to avoid the appearance of a physical border between the UK and Ireland. Negotiations on Brexit once again reached a dead end, reducing the chances of a possible conclusion of an agreement on the British exit from the European Union during the upcoming EU summit this week.
As reported last Friday by the US Department of Labor, the number of non-farm jobs increased by 134,000 in September (the forecast was +185,000). At the same time, the values for July and August were revised upwards by a total of +87,000. The unemployment rate dropped to 3.7% versus 3.9% in August, reaching the lowest level since the Vietnam War. Low unemployment, a continuing increase in the number of new jobs and higher real wages lead to higher consumer spending, which contributes to the growth of GDP.
The new week has already begun with a gap in the quotes of the Canadian dollar. As it became known, last Sunday the US and Canada reached an agreement on NAFTA. This is a positive factor for the Canadian currency, which reached its highest level in four months against the US dollar. Also worth highlighting Tuesday, when at 04:30 (GMT) will be published decision of the RB of Australia on the interest rate, and Friday, when at 12:30 (GMT) the US Labor Department will publish data on the labor market for September
This week two of the world’s largest central banks hold meetings and decide on the interest rate. Wednesday at 18:00 (GMT) the Fed’s will publish the decision on the interest rate, and at 21:00 (GMT) – the RBNZ. It is expected that the US Central Bank will raise the interest rate by 0.25% to 2.25%. The probability of such a decision, according to the CME Group, is almost 100%. Many investors have already have pawned in the prices another rate hike in December, and they will be interested in the Fed’s monetary policy course planned for the next year. On the part of the RB of New Zealand, investors do not expect changes in the current monetary policy, despite strong data on the country’s GDP for the 2 quarter, published last week.
In the new week, the release of consumer inflation and retail sales in the UK will be published. It is expected that retail sales in August fell, and inflation began to decline again. All these are negative factors for the pound. Market participants also need to take into account that the trade conflict between the US and China this week is likely to intensify. The administration of President Donald Trump plans to announce the introduction of new duties on Chinese goods worth $ 200 billion, and in Beijing, they are discussing retaliatory measures. The increase of trade risks can again provoke the growth of demand for the dollar as a protective asset.
As shown by the US Department of Labor data, published last Friday, the number of jobs outside agriculture in August increased by 201,000, the unemployment rate was 3.9%, and wages in August rose by 2.9% compared with the same month a year earlier (the forecast was 191,000, 3.8%, 2.7%, respectively). The data indicate a high growth in employment and wages, which allows the Federal Reserve to continue raising interest rates at a planned pace. The focus of traders’ attention this week will be meetings of central banks in the UK and the Eurozone, as well as the publication of a number of important macro data for the UK, Australia and the USA.
The focus of traders this week, in addition to the decisions of the central banks of Australia and Canada on interest rates, will be the report on the US labor market for August, which will be released on Friday. Data on the unemployment rate and the number of jobs created outside the agricultural sector (NFP) will be published, but the dynamics of the average hourly wage of Americans will be of greatest interest in the report. The higher the salary, the higher may be the future inflation and the greater the impact this will have on the rhetoric and the actions of the Fed in relation to monetary policy.
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