US UNEMPLOYMENT RATE FALLS TO 3.9% AS PARTICIPATION RATE DROPS

The Australian dollar gained earlier today after a statement from the Reserve Bank of Australia pointed to the possibility of future rate hikes. The statement increased chances of a rate hike, on the condition that the rate of inflation will reach the target, which they increased to 2% from the previous 1.75%. The officials were optimistic that this will happen as the unemployment rate drops and as more people joined the labor force. Still they were cautious about the housing problem in major cities of Australia and Melbourne where housing prices were falling.

In China, the United States delegation started its negotiations with Chinese policy makers. This was viewed as an important meeting with the aim of reducing the trade tensions that arose after Trump put tariffs on Chinese imports. Earlier today, Wilbur Ross, the commerce secretary said that the negotiations were going well. Still, there are key differences especially on the technology transfer. This is where China requires all foreign companies in the country to share their technology and trade secrets. There are also differences on the treatment of Chinese companies like ZTE and Huawei, which have been banned by US officials.

The Bureau of Labor Statistics (BLS) released the highly anticipated jobs numbers. The numbers showed that non-farm payrolls for April rose to 164K. This was lower than the 189K that traders were expecting. Wages too disappointed, with the average hourly earnings rising by 0.1%. The unemployment rate declined to 3.9%, which is the lowest level since December 2000. The unemployment rate fell to 7.8% from last month’s 8.0%. This number shows the percentage of the total work force that is unemployed and actively seeking employment during the previous month.

The numbers came just a day after the official government data showed that productivity growth was rising, deficit narrowing boosted by increased exports, and the number of people filing for jobless claims reducing.

AUD/USD

The AUD/USD pair started declining in mid-April, when it reached a high of 0.7812. The pair reached a low of 0.7472 on March 1. This was the lowest level since June last year. Today, the pair jumped slightly after the Reserve Bank of Australia (RBA) released the minutes of the previous meeting. The minutes showed that the officials increased the inflation target to 2%. The recent CPI data showed that prices rose by 1.9%, meaning that the bank could start tightening.

GER30

The DAX rose today to reach a high of 12,826 euros. This was the highest level since February. The index reached a YTD low of 11,692 euros in late March. Today’s gains came as signs of optimism on US trade deal with China emerged. Today’s gains were led by Infineon which rose by 2.15% fueled by Mergers and Acquisitions (M&A). The index is likely to rise as trade tensions ease but is likely to be affected if Trump exits the Iran deal. This is because many German companies in the index do business with Iran. New sanctions would interfere with how these businesses deal with the country.

EUR/USD

The EUR/USD pair was little moved following the release of April job numbers. The pair is currently trading at 1.1968, which is close to its YTD low of 1.1937. Today’s numbers show that while the labour force is tightening, wage growth was a problem. After weeks of steep declines, the pair seems to be consolidating, which means that it could reverse course on the upside.