Upbeat Nonfarm Payrolls Drive US Equities and Dollar, OPEC+ Announces Production Cut

There was a positive impact of upbeat Nonfarm Payroll (NFP) data on US equities and the dollar. Despite the rise in the unemployment rate, the addition of more jobs than expected has boosted optimism. Additionally, OPEC+ has made a significant announcement regarding a further cut in production, following their meeting in Vienna.

Key Factors for Today

• US equities and dollar surge as jobs data surpass expectations, despite a rise in unemployment.
• OPEC+ agrees to extend previous production cuts until the end of 2024 and announces an additional 1M bbl/day reduction.
• ECB officials acknowledge falling inflation but emphasize the need for a hike in June.

Market Movers

• USD/JPY jumps to 140.00 as US jobs data exceeds expectations, with unemployment rate reaching 3.7%.
• Gold experiences a decline, losing 1.50% on the day and hitting resistance at $1983 per ounce.
• WTI gaps higher as OPEC+ agrees to cut production, with prices initially reaching $75 per barrel.

Economic Calendar

• German HCOB Services PMI
• EA HCOB Services PMI
• GB S&P Global/CIPS Services
• S&P Global Services PMI
• ISM Services PMI
• Factory Orders
• BRC Retail Sales Monitor
• RBA Interest Rate Decision

US Jobs Data Surpasses Expectations, Unemployment Rate Rises

The US jobs report revealed that the economy added 339,000 jobs, nearly doubling the expected figure of 180,000. This surprising surge marked the 14th instance where analysts underestimated Nonfarm Payroll numbers. However, the unemployment rate experienced a rise, reaching 3.7%. This development led to debates about the interpretation of data, yet most traders still anticipated the Federal Reserve's decision to postpone any policy changes in June. As a result, the dollar rose back to 140.00 against the Yen, with a potential further increase to 141.00 unless support at 138.16 is compromised.

OPEC+ Extends Production Cuts and Announces Additional Reduction

Over the weekend, OPEC+ members agreed to extend the ongoing production cuts until the end of 2024, going beyond the initially planned expiration at the end of this year. In a significant move, overall production is expected to be reduced by 1.4 million barrels per day starting next year. Saudi Arabia, the leading oil producer within the OPEC alliance, committed to reducing production by one million barrels per day in July, signalling a willingness to adjust the amount in subsequent months if necessary. As a result, WTI prices soared by 2.65% on Friday, briefly reaching $75 per barrel before dropping below $72 per barrel early on Monday.

ECB Officials Assess Inflation and Monetary Policy

Two European Central Bank (ECB) officials Ignazio Visco from Italy, and Gabriel Makhlouf from Ireland, expressed their views on falling inflation and monetary policy. Despite the noted dovish stance of Ignazio Visco, who prefers gradual interest rate hikes, both officials agreed that the current policy is on the right track. While another hike is anticipated in June, they also acknowledged the uncertainty surrounding the need for further rate increases. Because of the jobs data, the euro weakened to $1.07 against the US dollar, potentially exposing $1.0634 unless bulls manage to reclaim $1.0783.