Janet Yellen, Vice Chair of the Federal Reserve is keen to stress that “unemployment remains too high”. Her stance indicates alignment with previous outgoing Chairman Ben Bernanke’s notably low interest rates. Financial market interest is further compounded by clear sensitivity from the Federal Reserve towards unemployment. Increased emphasis on monetary initiatives to sustain/improve employment emphasises the impact of these stats across the global economy.
The US employment situation is far from dire. The Department of Labor recently reported that the economy actually exceeded the expected number of new jobs created in November, adding 203,000 new positions instead of the expected 185,000. Add to this a dropping unemployment rate from 7.3% to 7%. Traders are circulating around these figures; a 0.5% drop in unemployment rates increases the likelihood of Federal Reserve intervention and tapering of the QE policy.
The latest employment data had a relatively positive effect on the US dollar. The dollar gained gained ground against other currencies, namely the CAD. The data tricked further into the EUR/USD pair, with the Euro hitting a new high following the news. The US dollar rise broke away from a five-day slide for the S&P 500 index. Jim Russell, equity strategist from U.S. Bank Wealth management noted “the market is getting increasingly comfortable with a taper scenario that parallels an incrementally stronger economy”.
With the Federal monetary policy decision coming ever-closer, all data is subject to thorough market dissection as analysts seek out clues or insight into the US economy. As expectations build so too does market volatility.
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