An Overview of Market Post-NFP

Alarm bells ringing for the US economy with the impact of the coronavirus and the subsequent lockdown measures placing significant pressure on the labor market. The data published by the US Bureau of Labor Statistics revealed that Nonfarm Payrolls (NFP) in March declined by 701K and the Unemployment Rate surged to 4.4% from 3.5%.

Let’s take a closer look at the impact of the March NFP report:

US NFP Dropped -701k, Unemployment Surged to 4.4%

US non-farm payroll employment dropped -701k in March. Two-thirds of the drop occurred in leisure and hospitality. Notable declines also occurred in health cases and social assistance, professional and business services, retail trade, and construction

The unemployment rate jumped from 3.5% to 4.4%. That’s the largest over-the-month increase since January 1975. The labor force participation rate dropped -0.7% to 62.7%. Average hourly earnings rose 0.4% mom.

market NFP

Worst Jobs Report Since 2009

For the first time since 2010, job growth in the United States turned negative as Friday morning’s non-farm payrolls report for March revealed a staggering loss of 701k jobs. Analyst expectations were looking for the loss of 100k jobs as the COVID-19 pandemic was largely expected to drag down the labor market in the US. The US Dollar initially rose on the report before heading lower as the report crossed the wires, revealing an end to the record-breaking run for the US jobs market.

For now, market volatility remains relatively subdued compared to a few weeks ago, likely due to fiscal and monetary support from policymakers and the Federal Reserve. However, recessionary fears have increased considerably and evidence points to the US economy already being in a recession. Fed Chair Powell noted that we already may be in a recession last week.

Worse Coronavirus Impact Than Anyone Anticipated

The beginning of US layoffs tied to the coronavirus showed up earlier than expected, but the drop in March is still far from an accurate picture of labor markets today, according to Nathan Janzen, a Senior Economist at the Royal Bank of Canada.

“The April jobs decline will almost certainly be the biggest in recorded history and measured in the millions rather than thousands. The April unemployment rate could well jump to 15% or more.”

EUR/USD Extends Slump After Nfp Shows Massive Job Loss

EUR/USD has lost more than 50% of the gain from 1.0640 to 1.1150, raising the chances that the rise was the correction and that new lows are on the cards. The currency pair is trading below the 50, 100, and 200 Simple Moving Averages, and the Relative Strength Index is above 30 – outside oversold conditions.

Support awaits at 1.0820, Thursday’s low, followed by 1.0750, which was a stepping stone on the way up. The 2020 trough of 1.0640 is critical support.

Resistance awaits at 1.09, which provided support earlier this week, and it is followed by 1.0970, which held it down around the same time. The next levels to watch are 1.1050 and 1.1090.

The USD Is Still The Best

Nonfarm Payrolls much weaker than expected, but still not nearly as weak as seems likely for the April report in early May, in the opinion of economists at TD Securities.

“Once the dust settles and the recessionary mindset is now afoot, the USD is still the best of a bad lot. We struggle to think that any of the majors poses a threat to the depth and liquidity of the world’s reserve currency.”

“The foreign exchange market is fairly well-kept following this awful number. Unfortunately, the jobs data will only get materially worse for April.”

The US Dollar maintained gains recorded early on during Friday’s trading session after the March 2020 NFP report came across the wires. Judging by performance in the DXY Index, the US Dollar was higher by about 0.55% on balance even though the latest nonfarm payrolls print was the worst jobs report since 2009.

Eurozone Retail Sales Rose 0.9%, EU Sales Rose 0.8%

Eurozone retail sales grew 0.9% mom in February, versus expectation of 0.1% mom. The volume of retail trade increased by 2.4% for food, drinks and tobacco and 0.2% for non-food products, while automotive fuels fell by 0.1%.

EU retail sales grew by 0.8% mom. Among the Member States for which data are available, the highest increases in the total retail trade volume were registered in Estonia (+4.4%), Latvia (+3.5%) and Portugal (+3.0%). Decreases were observed in Ireland (-2.7%), Slovenia (-1.8%), Croatia and Poland (both -0.2%).

Wall Street Opens Modestly Lower Despite Gloomy NFP Report

Wall Street’s main indexes started the day last day of the week with modest losses even after the data published by the US Bureau of Labor Statistics showed that Nonfarm Payrolls declined by 701K in March. Additionally, the Unemployment Rate rose to 4.4% from 3.5% in February.

Energy Shares Extend Rally

As of writing, the Dow Jones Industrial Average was down 0.35% on the day while the S&P 500 and the Nasdaq Composite were erasing 0.2% and 0.25%, respectively.

Among the 11 major S&P 500 sectors, the Energy Index was up 3% as the top-performer while the Utilities and the Consumer Discretionary indexes were posting small losses. Rising crude oil prices on hopes of OPEC+ opting out for a 10 million barrels per day oil reduction seems to be providing a boost to energy shares for the second straight day on Friday.

While the US continues to post scary job numbers, the markets couldn’t care less. Investors know the numbers would be bad and it doesn’t matter how bad they are. The point is, there has to be an end to the coronavirus pandemic, which originated from China. Otherwise, the economy will just continue to turn from worse to… even worse.

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