James Trescothick

With more than 20 years of experience in financial service industry, James is our Senior Global Strategist and the co-producer and presenter of easyMarkets educational videos. When he is not working on educational programs or preparing webinars, you can find him with the easyMarkets team giving seminars around the world.

The year started on a high note for stocks and commodity investors. Crude oil is currently trading at a three-year high and the American stock market continues to break records with the S&P trading above $2,700 and the Dow trading above $25,000 for the first time.

Today, investors were eying United States jobs numbers from ADP. The released numbers showed private sector additions of 250K against the expected 190K while the continuing jobless claims decreased to 1.94 million against the expected 1.92 million.

Tomorrow, investors will watch out for the United States unemployment rate, non-farm payrolls and wage growth. Investors expect the data from the Bureau of Labor Statistics to show non-farm payrolls of 190K and wage growth of 0.3%. They expect the unemployment rate to remain steady at 4.1%.

The numbers released this week will be very important and will play a major role in determining the chances of a rate hike in the Fed’s January meeting.

Yesterday, the Fed released its minutes for the December meeting that hiked interest rates for the third time while signaling three more hikes. The minutes showed that the Fed’s decision was partly attributed to the tax reform package which was signed into law by Donald Trump.

According to the Fed, the corporate and individual tax rate would lead to further consumer spending which could make inflation reach the Fed’s target of 2%. The members also used the argument to increase their 2018 GDP growth forecast from the previous 2.1% to 2.5%.

However, the minutes showed some sceptism for the tax reform package with some of the members questioning how corporations will spend the tax windfall. Some of the members argued that instead of investments, companies will use the funds to pay dividends and increase share buybacks.

The data, which will be released tomorrow, will give an indication of whether companies have accelerated hiring and growing wages or not. Remember, with the unemployment rate at 4.1%, the country is in full employment. This happens when the number touches 5%.

The ADP data released today did not help the dollar as the currency fell against the major currencies like the Euro, Yen, and Canadian dollar. This is because investors are growing concerned about the long-term issue of the dollar hegemony. This is after reports from multiple countries like Pakistan and Iran said the countries would dump the dollar in their global trade.

While the data to be released tomorrow will be important, traders will pay closer attention to wage growth which has struggled in the past releases. With more Americans at work, and with labor shortage looming, traders will want to see whether the employees wages have increased.

After the tax bill was signed, multiple companies like Wells Fargo, AT&T, and Third Fifth bank announced that they would offer bonuses and increase wages. It is still early for this data to be reflected on a large scale. Still, investors will want to see whether the policies will spur growth as promised.

 

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