Jobs numbers have been quite good for some time, labour market in a very solid position

 Chicago Fed President and FOMC member Charles Evans said on Friday, shortly after the release of official US labour market data, that the jobs numbers have been quite good for some time and that the labour market is in a very good position, reported Reuters citing an interview on CNBC. There is a tremendous amount of uncertainty regarding Russia and Ukraine, Evans said. 

The latest jobs report doesn’t really change anything that Fed Chair Jerome Powell is positioning for, Evans continued, a remark that might be interpreted as Evans encouraging markets not to start rebuilding expectations for a 50bps rate hike later in the month. Recall that Powell earlier in the week signalled a 25bps hike. With inflationary pressures, we need to be moving towards a more neutral monetary policy position, Evans added, saying that we need to be within striking distance of neutral if that’s necessary. 

This is not the 1970s of how inflation got out of hand, he continued, though the Fed needs to be close enough to neutral by the end of the year so that we can deal adequately with inflation. The recent commodity price rise reinforces “unhelpful” tendencies in prices, Evans continued, adding that by the end of the year, we will have a better fix on how far we need to go on rates. 

I don’t think we will see nearly as restrictive setting of monetary policy as we did in the 90s, the Chicago Fed President went on, remarking that doing 25bps of rate hikes at each meeting may be more than essential. 

EUR/CHF on the way to parity as markets drive euro over the abyss due to Ukraine crisis

 

  • EUR/CHF is on the way to parity as the euro gets crushed. 
  • US NFP data was very strong, as expected, sending the US dollar to fresh highs. 

EUR/CHF has reached a new low at 1.0025 on the back of the stellar US Nonfarm Payrolls report which has propelled the greenback to a fresh high and sent the euro into the abyss where it touches 1.0885 vs the US dollar, breaking 1.0900.  

The US jobs data arrived as follows:

  • US Change in Nonfarm Payrolls Feb: 678K (est 423K; prev 467K).
  • US Unemployment Rate Feb: 3.8% (est 3.9%; prev 4.0%).
  • US Average Hourly Earnings (Y/Y) Feb: 5.1% (est 5.8%; prev 5.7%).
  • US Average Hourly Earnings (M/M) Feb: 0.0% (est 0.5%; prev 0.7%).

The DXY is now trading around the highs of the day at 98.916 as markets price in a Federal Reserve rate hike. However, the week is also ending on a risk-off note and this is crushing the euro.

”There is now really nothing in the way of support until the April 2020 low near 1.0725 and then the March 2020 low near 1.0635,” analysts at Brown Brothers Harriman said.

In terms of the Federal Reserve the analysts said, ”given the heightened uncertainty surrounding the Ukraine crisis, we think 50 bp would simply be too aggressive at the moment. WIRP suggests zero odds of a 50 bp move and so the Fed does not have to feel that it has to do 50 bp just to meet market expectations,” analysts at Brown Brothers Harriman said.

”The Fed can then wait nearly two months until the May 3-4 FOMC meeting to see how the crisis has impacted the US economy before deciding on its next move.  If circumstances warrant, the Fed could always move intra-meeting but that seems unlikely right now.”