The Nonfarm Payrolls (NFP) report showed a sharp decline in the U.S. job market for the month of March amid ongoing jobs losses in the retail sector. However, a drop in the key U.S unemployment rate to 4.5% from 4.7%, gave traders hope that the low headline jobs figure may be due to seasonal factors and the jobs market strength remained intact.
The NFP figure showed 98,000 jobs had been created for the month of March, the fewest since last May, the U.S Labour Department reported on Friday. Analysts expected 180,000 U.S jobs to be created, however it was also anticipated that bad weather could have an effect on the March data, and this might have accounted for the steep decline in jobs created this month.
The breakdown of the jobs report figures showed that aside from poor retail employment figure, job creation was also held back by a slowdown in hiring by factories, construction sites, leisure and hospitality businesses.
The market reaction to the weak headline jobs number was indecision, the U.S. dollar initially sold off, but later recovered and remained slightly positive for the day as traders weighed up the poor season weather effects against a very encouraging unemployment rate.
Geopolitical uncertainty also crept into market sentiment on Friday as the U.S. delivered a military attack to a Syrian air base in response to an alleged chemical attack by the Syrian President Bashar al-Assad. Markets looked to the response of Russia, a key ally of the Syrian regime, and any retaliation to the U.S. bombing from Syria.
On Thursday the European Central Bank (ECB) President Mario Draghi delivered a speech where he spoke about the state of the European economy and the inflation outlook for the Eurozone. He noted that the economy was gradually improving, but he struck a cautious tone towards EU inflation, stating that the ECB has not seen sufficient evidence to change his opinion that inflation remains temporary.
The content of the Federal Reserve Open Market (FOMC) minutes proved to be eventful on Wednesday as the Fed said they could change their assessment on raising rates this year at any time, and hinted they may reduce the size of their balance sheet this year.
Last week also included the monthly Reserve Bank of Australia (RBA) interest rate decision and policy statement, and it was decided by policymakers to keep rates unchanged at 1.5% as widely expected. However, they highlighted their concerns about the Australian property market, and last month’s surprise decline in employment.
Forex markets remained in tight trading last week ahead of the upcoming Easter bank holidays and shortened trading week. The U.S. dollar managed to gain ground against the euro, British pound and Swiss franc. The euro fell below the key 1.06 level and continued falling to end another week of losses for the single currency. The British pound fell back towards the 1.2370 level as the week ended, despite being boosted on Wednesday by stronger than expected Services PMI data.