Warrington Shaw - US Employment Data Could Encourage Fed to Hike Rates

Warrington Shaw - Data-reliant US central bank could use strong employment report to justify interest rate hike next year.

Analysts at Warrington Shaw say the Labor Department's monthly report on wage growth and non-farm payrolls will be closely watched for signs of strength that could encourage the US Federal Reserve to proceed with planned interest rate increases next year.

The dollar started last week with losses after US President Donald Trump and Chinese President Xi Jinping agreed to a 90-day ceasefire in their trade war after meeting on the sidelines of the G20 summit in Argentina.

Several employment reports, relevant ahead of the nonfarm payrolls published monthly by the Labor Department, indicated soft employment numbers and also weighed on the greenback but Warrington Shaw analysts say uncertainty over trade prevented too much of a decline in the American currency.

Warrington Shaw analysts say the employment reports were disappointing, coming in below market forecasts. ADP nonfarm payrolls dropped to 179,000, below the predicted 196,000, reaching their lowest level in 7 months. Unemployment claims dropped to 231,000 but was still higher than the expected 226,000.

Warrington Shaw analysts say economists are predicting an increase of 200,000 in nonfarm payrolls in November and a revised increase of 250,000 the month before. A robust employment report would help to soothe concerns over the state of the US economy and would up the chances of the US central bank continuing to hike interest rates as planned in 2019.

Financial markets are currently predicting one interest rate hike in 2019 and the US Federal Reserve is expected to increase interest rates one more time before the end of this year, making this the fourth interest rate increase for 2018.

Source: Warrington Shaw