Jobs Data Less Significant After Yellen Remarks

With Janet Yellen’s comments on Tuesday having appeared to have left little chance of a rate hike in April, or even until later in the year, it will be interesting to see how the markets respond to this week’s employment data. Quite often the jobs report is seen to be influential in determining whether the Fed will hold or act at the next policy meeting but Yellen’s comments yesterday indicated that another rate hike is not imminent.

Yellen was keen to downplay the recent rise in core inflation, as measured by the Fed’s preferred inflation measure, the core PCE price index, while highlighting that global risks remain. While a number of factors must be considered when determining the correct timing of the next rate hike – including the domestic economy, global conditions and financial markets – it’s clear from the contradictory messages from Fed officials over the last week, and the increasing dovishness of Yellen, that policy makers are now moving further from forming a consensus than they have previously.

FX5: Dollar’s Worst Month In Five

Combine that with the fact that markets are clearly convinced that the next rate hike is not close – probability based on Fed Funds futures only exceeds 50% in November following Yellen’s comments – and Friday’s jobs report may not be the highly volatile event it has been at times.

Economic Calendar

Source – CME Group FedWatch Tool

Of course, there is still often a lot of volatility around this event but with it not being seen as having a big influence on the outcome of the upcoming meetings, markets may revert back to normal levels of volatility. We could get some insight into what we can expect when the ADP non-farm employment figure is released later today.

Oil has pulled back off its highs over the last week after inventory numbers showed a large build of 9.4 million barrels. We’ll get the latest number today which could determine whether Brent and WTI build on the losses of the last week or push on again to test last week’s highs. While I’m not convinced that the rally since early February has the legs to push much higher, I do feel there may be a little further to go which could be spurred on by a negative inventory figure today.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam