MARKETS: Painful NFP crumbles March hike expectations

 
The surprisingly weak results might also raise alarm bells in the United States because job creation has been one area of the economy that has performed strongly, and which had led to optimism that interest rates would be hiked in the first place.
What is important in the mid-term is that aside from an unexpectedly poor headline number of jobs created, the unemployment rate has dropped to an eight-year low of 4.9% and there has actually been some growth in wages over the previous month. Wage growth at 0.5% is better than what was expected at 0.3% and might actually improve the prospects for inflation, which is an area of the US economy that the Federal Reserve is continuously monitoring. Nevertheless, the mixed employment report adds to the recent string of negative data in the U.S., which is encouraging suspicions over whether it was the right move for the Fed to finally raise rates last December.
Like the jobs report, the reaction to the USD after the NFP result is mixed. In the bigger picture, the elevated anxieties over slowing global growth, depressed commodity prices has exposed the US economy to downside risks and we are beginning to regularly notice that economic momentum is slowing. The weak headline jobs report has hardly improved expectations over the Fed raising interest rates in March, which means that Dollar weakness might continue to take centre stage as investors continue to push back US interest rate expectations.
With any remaining expectations around the possibility of a US rate hike in March or 2016 dismissed, Gold bulls salvaged this opportunity to drive prices to fresh 4-month highs at $1162. This yellow metal is bullish and the risk-off trading environment complimented with Dollar weakness may provide a foundation for bullish investors to send prices towards $1180 and potentially higher. From a technical standpoint, previous resistance at $1160 may transform into a dynamic support which should encourage a further incline towards $1180.
Overall, Friday’s NFP results has thrown up some tricky questions about progress in the US economy, and alongside slowing global growth, this has consequently dimmed any hopes around the Fed increasing interest rates once again. Most other central banks have already adopted a negative rate policy and if this pain of falling commodity prices and heightened anxieties over global growth continues to punish the US economy, then the Fed may swallow its pride and postpone any ideas around raising interest rates once again altogether.

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