Jobs Expected Up 175,000 as Gold waits, Yuan dives

 

 

  • consensus  is 175,000 jobs added in December (BBG)
  • 8:30 release potentially delayed on D.C. weather conditions

 Yesterday, San Fran Fed's John Williams reaffirmed the Fed's three interest rate hikes were reasonable for 2017 as things currently stand. This was higher than the market's consensus going into December of 2 hikes and a primary driver behind the USD rally thereafter. "The central tendency of the views of my colleagues -- around three rate hikes -- that’s, I think, a very reasonable view,” Williams told CNBC television in an interview on Thursday.Today's Jobs number is estimated to come in around 175,000 new additions.

Last month's Fed minutes revealed the the FOMC confusion on how to interpret PEOTUS Trump's policy positions. Their belief that fiscal side stimulus is coming had increased inflationary vigilance on the monetary side. They were not entirely sure when those policies, if implemented would occur. “All of these issues around fiscal policy and other policy are things that we study very closely and analyze,” Williams said. “From my perspective, we don’t know what’s going to happen.” It can take months for Congress to agree on new policy proposals before they’re signed into law. This is why we saw the USD pull back from 10 year highs.

That makes the Jobs number today probably a little more relevant than usual for short term traders of Gold and the USD. An upside surprise will likely put the greenback back on its upward slope and cement the 3 hikes statement (or more) in 2017. a weaker number may also not be so bearish for the USD as the Fed is looking at fiscal policies in the future for its rationale. Their argument may not be swayed by this month's number.

Essentially:

  • Jobs strong: Dollar rises on confirmation of Fed rationale
  • Jobs weak: Dollar may not weaken on Fed's  Trump fiscal stimulus rationale

"That would give a slightly bearish skew to Gold for the day. As always during a POTUS transition, it is hard to know what is and is not baked into the cake.  If there was no event-risk today, we'd be inclined to say the pullback this morning is healthy. But impulsive markets make for bigger knee jerk reactions even on non starter jobs numbers. A Trump tweet can move markets now. Markets are whippy and trading with hot money," a NY Fund manager said today

Gold down on Yuan weakness or Jobs number anticipation?

Interactive chart here

That said, the above "skewness" is in complete contrast with how the market took yesterday's Fed minutes release. The December minutes showed they were not looking to ramp up rate hikes further for fear of derailing the recovery underway. The market saw this as jobs more important than inflation and reacted accordingly sending Gold to 4 week highs.

Gold is currently trading $1177.00 down from yesterday's highs. The Yuan is on a wild ride and now weaker over 1% off-shore and having an effect on global markets.

 

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