Today we have significant change in market risk appetite what has certain impact on several assets like government bond yields, Gold, Japanese Yen, Swiss Franc which are also know as “safe heaven assets”
US, German and Japan Government bond yields tumbled today, US Dollar sank against major peers and gold surged after publication of Non-Farm Productivity report, which usually has a low market impact :
As we can see the actual reading completely missed expectations – productivity fell -0.5% while it was expected to grow 0.4%. In the run-up to FED decision on raising rates in 2016, markets became very sensitive to every piece of labor, consumer and inflation data which can point to the strength/weakenss of US growth. In case of Non-Farm productivity which indicates output per labor hour, the drop could signal serious slowdown in business growth, given that the labor costs constitute about 2/3 of average business costs in US.
Consistent growth of Average Hourly earnings in US paints much more gloomy picture of US Business outlook – labor costs grow while its productivity declines:
The divergence of actual productivity data could be also connected with lackluster growth and slack in jobs in April-June:
Here is how the report affected DXY (red line) and XAUUSD (candles)
I guess that impact from the report will be probably short-term and markets will soon return to the digestion of Central Banks stimulus, increasing their wagers on risk assets. The gold is expected to retreat back to $1.340 level, while US Dollar regain positions it gave up yesterday.
The pair is expected to drop below 1.30 till the rest of this week, the signal is SELL, TP – 1.29100, SL – 1.3100. Preferred lot size – 0.2 lot.
The upsurge on bullion won’t probably find support to push it for new heights so will probably retreat back to 1,340 level till the rest of this week. The signal for today is SELL, TP – 1,350 level, SL – 1,360.50. Preffered lot size – 0.1 lot
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