US NFP exceeded estimates
US economy added 263,000 new jobs beats estimates of 250,000 and the Unemployment Rate fell to 3.5%. Although it is a lower reading than August’s statistics, it was above expectations which would strengthen the case for a Federal Reserve rate hike. Finally, average hourly earnings (AHE) which is used to evaluate wage inflation decreased from 5.2% to 5% annually.
After the US Labor Department released employment numbers that were higher than expected and supported the Fed’s need for additional tightening, the gold price tumbled along with equities while the US dollar remains bid.
FOMC Meeting Minutes
Minutes of the FOMC meeting last September 21 will be released on Wednesday. Remember that the FOMC raised rates by 75bps at its September meeting, bringing the Fed Funds rate to its present value of 3.25%. Inflation would also be 5.4% by the end of 2022 and 2.8% at the end of 2023, according to the “Dot Plots” charts.
The Fed also anticipated that the Fed Funds rate would increase to 4.4% by 2022’s end and 4.6% by 2023’s. Consequently, a hike of 75bps in November and a rise of 50bps in December would be implied. In addition, they also predict that at the end of 2022 and 2023, the unemployment rate will be 3.8% and 4.4% respectively.
Eyes on US inflation data
The US will release its CPI report on Thursday, giving traders an opportunity to observe how inflation performed in September. While the Core CPI is anticipated to rise to 6.5% YoY from 6.3% YoY, the headline print is anticipated to decrease to 8.1% YoY from 8.3% YoY.
The October Preliminary Michigan Consumer Sentiment Index will be released on Friday. The 5-year inflation component is predicted to be 2.7% while the 1-year component is predicted to be 4.7%. We will soon find out if the Fed will likely to raise rates by less than 75bps if the inflation data comes in lower than anticipated.