Weekly Market Update (09 October 2021) – U.S. jobs report sent out mixed results

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ByLCMS Traders FX Analysis Team

 OCT 9, 2021

(1) The OPEC+ concluded its October meeting last week, sticking to the plan of increasing oil production on a monthly basis by 400,000 bpd for November despite receiving continuous pressure to raise production to a higher level. At the current rate, the OPEC+ will be able to phase out its remaining production cuts by April 2022. As a result, oil prices rose.

(2) The Reserve Bank of Australia (RBA) held its monetary policy unchanged as expected during their meeting last week. The central bank highlighted that the recent Delta outbreak in Australia has disrupted the economic recovery in Australia. Hence, GDP is expected to decline during the third quarter of this year. The RBA also reiterated that it does not expect the condition for a rate hike – actual inflation is sustainably within 2-3% – to be met before 2024.

(3) Moving on to the Reserve Bank of New Zealand (RBNZ), the central bank hiked its interest rate by 0.25% as widely expected. The New Zealand dollar strengthened for a brief period of time before losing back its gains and weakened further, indicating that the central bank’s action is a dovish hike. This phenomenon is due to the RBNZ lowering its rate hike percentage from the previous 0.50% expectation to the current 0.25%. Nonetheless, the RBNZ also mentioned that the recently imposed COVID restrictions “have not materially changed the medium-term outlook for inflation and employment since the August Statement”, thus indicating that the central bank’s view on the current situation is still optimistic.

(4) The U.S. Bureau of Labor Statistics (BLS) released a rather disappointing jobs report on Friday, indicating that 194,000 jobs were created in September as opposed to the expectation of 490,000 jobs. Average hourly earnings continue to rise at a faster rate of 0.6% as recent increase in labor demand added an upward pressure on wages. Unemployment rate declined more than expected to 4.8% but is still above the pre-pandemic level of 3.5%. Nonetheless, the number of jobs created for August and July were revised upwards by a total of 169,000 jobs. Overall, this jobs report sent out mixed results, leading to no clear direction for the U.S. dollar.