June 2nd, 2023 – Gold declines as risk appetite increases immediately after the release of the US labor market report
The US dollar was able to achieve gains against gold and against the major currencies after the release of the US labor market report for the month of May, which showed the addition of 339 thousand jobs outside the agricultural sector, while expectations were indicating the addition of only 190 thousand jobs after adding 253 thousand jobs in April. They were reviewed today to become only 294 thousand.
At the same time, the report showed an increase in the unemployment rate to 3.7% from 3.4% in April, its lowest level since 1969, while it was expected to rise to 3.5%. % while it was expected to stabilize at 6.6% as it was in April.
As for the inflationary pressures of wages in the United States during the months of May and July, today’s labor market report showed an increase in the average monthly hourly wage by 0.3%, as expected, after an increase in April by 0.5%. It was revised today to become 0.4%, with an annual increase of 4.3%. % while it was expected to rise by 4.4% annually, as happened in April.
The report was mixed, as previously, and the statements of the Federal Reserve came this week, as Michelle Bowman, a member of the market committee that determines the monetary policy of the Federal Reserve since 2018, referred to the recovery in prices within the real estate market, explaining that “the stability of house prices will have an impact on the Federal Reserve’s next steps to contain inflation.” According to Reuters.
Meanwhile, Cleveland Fed President Loretta Mester, a Federal Reserve Committee member, said she still prefers the Fed to raise interest rates again this month.
While the opinion of a member of the market committee that determines the monetary policy of the Fed and the candidate for the position of vice president, Philip Jefferson, was contrary, indicating that the Federal Reserve’s cessation of lifting now will give it a greater opportunity to see and examine more data to find out the extent of the need for a cited monetary policy in order to contain inflation, according to Reuters as well, which is what A member of the Market Committee and President of the Federal Reserve Bank of Philadelphia, Patrick Harker, agreed with him, who said explicitly last Wednesday that he tends to support a “stop” in raising interest rates at the next meeting of the Federal Reserve members on the 13th and 14th of June, God willing.
While the initial reaction to the issuance of the labor market report today was the rise of the dollar against all major currencies and against gold as well, with the trend of returns within the secondary financial markets to rise collectively, supporting the attractiveness of the dollar.
The yield on the US Treasury bill for 10 years, which usually attracts market attention now, is above 3.66%, after it was near 3.61% before the issuance of this report, which put gold under pressure, bringing it down to $1961 an ounce.
The euro also fell to 1.0725 so far against the dollar, which continued to rise against the yen, to be presently at 139.7, somewhere closer to the psychological level of 140, and the futures contracts for US stock indices tended to rise immediately after the release of the statement and also after the beginning of the American session.
The Dow Jones Industrial Future Index is currently located near 33525 during US trading, and after the issuance of that report, which also raised the Standard & Poor’s 500 future index to the limits of 4270, where it is currently located, as well as the Nasdaq 100 future index, to be located near 14550 at the time of the completion of writing this report.
It is difficult to ignore the impact of this good performance of the labor market on the economy and demand in general within the United States, although at the same time the strong performance of the labor market also gives the Fed the opportunity to keep the interest rate high for the longer term, which contributes to the high cost of borrowing and weakening investment spending in general. Which is negative for the US stock markets.
Currency and metals markets expert/ Walid Salah El-Din Mohamed
Email / chief.economist@hotmail.com
