TREX Global:Non-farm payrolls dampen expectations for Fed rate cut this year

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U.S. job growth picks up pace in January, unemployment rate falls to lowest since 1969

U.S. job growth accelerated sharply in January and the unemployment rate fell to 3.4 percent, the lowest in more than 53-1/2 years, suggesting a stubbornly tight labor market that could cause headaches for Fed policymakers struggling to combat inflation.

The jobs report also showed that the number of jobs created over the past year was much higher than previously estimated, suggesting the economy is far from reaching recession. While wage inflation cooled further in January, average hourly earnings rose faster than previously estimated in 2022.

Hiring was strong despite layoffs in the technology industry and rate-sensitive sectors such as housing and financials, throwing cold water on expectations that the Fed is close to pausing its monetary policy tightening cycle.

U.S. services PMI rebounds in January, signs of life as economy nears recession

U.S. service sector activity rebounded strongly in January as new orders picked up and the prices companies pay for raw materials continued to rise modestly, a hopeful sign at a time when a recession is likely this year.

The Institute for Supply Management (ISM) data on Friday showed that the non-manufacturing purchasing managers index (PMI) rose to 55.2 in January. The index fell to 49.2 in December, the first time since May 2020 that it fell below the 50 mark that separates expansion from contraction. Economists had predicted that the non-manufacturing PMI rose to 50.4 in January.

The services sector, which accounts for more than two-thirds of U.S. economic activity, is benefiting from a shift in consumer spending from goods to services. The Fed's fastest rate-hiking cycle in the 1980s has sapped demand for goods, which consumers typically use credit cards to buy.

Dollar jumps after unexpectedly strong non-farm payrolls
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At the beginning of the Asian market on Monday (February 6), the U.S. dollar index rose slightly, hitting a new high of more than three weeks to 103.24, continuing last Friday's gains. The dollar surged 1.23% on Friday after data showed U.S. employers added significantly more jobs in January than economists expected, potentially giving the Federal Reserve more leeway to keep raising interest rates.

U.S. Treasury yields jump as services sector activity rebounds, job surge weighs on Fed

U.S. Treasury yields jumped on Friday after data showed U.S. job growth accelerated sharply in January and services sector activity rebounded, further complicating the Fed's attempt to slow the economy to lower inflation.

ECB policymaker says another rate hike in May

Two ECB policymakers said on Friday that another rate hike in May was likely after the ECB signaled a hike in March, with one arguing that peak or "terminal" rates were at least beginning to be seen.

The European Central Bank raised interest rates by 50 basis points to 2.5 percent on Thursday and pledged to take similar action in March, but left room for follow-up moves, casting doubt on investors about its resolve to keep raising rates to curb inflation.

TREX Global’s view:Although the gold price has rebounded and adjusted after a short-term sharp drop, geopolitical tensions have also attracted bargain hunters to support the gold price, but last week the Federal Reserve, the European Central Bank, and the Bank of England all continued to raise interest rates, making it an opportunity to hold gold. With the increase in costs, the three major central banks have room to raise interest rates further in the future, which has depressed the morale of gold bulls, especially in the outlook for the US non-agricultural data and ISM non-manufacturing data. The market expects more interest rate hikes by the Fed. Expectations of interest rate cuts this year have cooled, the dollar has soared, and U.S. bond yields have risen, causing gold prices to fall below the support of the 1900 mark. Technically, the short-term peak signal of gold prices has further strengthened. If the 1900 mark cannot be recovered quickly, the gold price is expected to further fluctuate and adjust downward in the market outlook .

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