Pressure is mounting on central banks

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Stock markets are back in the red on the last day of the week as investors continue to worry about the prospect of an interest rate hike this year.

Whether it is simply a depletion of the omicron relief trade, a case of the January blues that will be quickly forgotten once the earnings season begins next week, or something more important not will become clear that later this month.

But the data doesn’t offer investors much luck, and the jobs report is just another example. The absence of the NFP title was never going to generate too much relief, as signs of strain elsewhere will always take precedence. That said, investors may feel like they’ve dodged a bullet, as the million new jobs some have predicted could have further convinced policymakers that the United States is close to full employment.

But the average earnings figures, higher turnout and falling unemployment rate will surely eclipse the NFP figure when it comes to the central bank. Higher participation is encouraging, as the slow recovery on this front is contributing significantly to the tightening labor market. But the faster-than-expected wage rise will add to the prolonged inflationary pressures that will affect the Fed.

Will the ECB align with its peers?

Inflation in the eurozone unexpectedly hit a new high in December, stepping up pressure on the ECB to follow suit with many of its peers and tighten monetary policy. The central bank is now part of a minority that sees inflation as transitory and while it may turn out to be correct, the data does not make it easy to read.

Other central banks recently ditched the transitional line and this will only increase calls for the ECB to do the same. Policymakers seem to strongly believe that inflation will come down without a rate hike during this year. The question now is whether they will have the time to be right or to align with others and the markets.

Oil at two-month high as OPEC struggles to meet quotas

Oil prices continue to climb over the weekend as unrest in Kazakhstan and declining Libyan production further hamper the ability of producers to gradually return to pre-pandemic levels. We are already seeing OPEC + struggling to deliver the agreed increase of 400,000 barrels per day and this exacerbates the problem further.

And it’s coming at a time when demand is expected to remain strong thanks to omicron’s symptoms being mild compared to other variants. It’s no wonder that prices are almost back to November highs, with WTI now having returned above $ 80 for the first time in two months.

The bullish argument for gold is weak

Gold is slightly higher the day after experiencing increased volatility around the release of the jobs report. The yellow metal rose immediately after the release, with the big NFP dud hitting the dollar. But as is so often the case on Labor Day, the knee-jerk reaction to the NFP title number turned out to be broadly wrong, and the tide was quickly reversed. Volatility has remained since, but appears to be settling a little higher than pre-NFP levels.

There is a lot to digest in the Jobs Report and it can sometimes take a little while for it to happen. The bottom line is that the report doesn’t make rate hikes or balance sheet reduction any less likely, especially with wages rising as much as they did. This is not good news for gold and therefore the bullish case remains weak as it struggles to recover $ 1,800 again.

Jobs report hits bitcoin hard

It would appear that bitcoin traders weren’t particularly thrilled with the jobs report either, with the cryptocurrency adding to its post-Fed losses immediately after the release. While lax monetary policy has been one of the main catalysts of the bitcoin boom over the past two years, the crypto mob could be in a rough period of 2022 as central banks, the Fed included, are in tightening mode. . And today’s wage growth figures will only further galvanize them to act to slow the rate of inflation. In a way, I don’t think they’ll be put off for too long.

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