February 6, 2023: NFP Increase by 517K, Largest Gain Since July 2022

US Demand for Labour Remains Strong Despite Fears of Recession.

Unexpectedly, the number of US available jobs increased in December, demonstrating that there is still robust demand for workers despite higher interest rates and growing recessionary fears. This could encourage the Federal Reserve to continue tightening monetary policy.

According to the monthly Job Openings and Labor Turnover Survey, or JOLTS report, released by the Labor Department on Wednesday, there were 1.9 vacant positions for every unemployed person in December.

The Federal Reserve increased its policy rate by 25 basis points on Wednesday after a two-day meeting, significantly pausing the Fed’s rate hikes despite indications of continued labor market tightness. Borrowing costs would “continually grow,” according to the Fed.

The Dollar Grazes its Highest Level in 4 Weeks.

The dollar extended its rally on Monday after a strong US jobs report suggested the Federal Reserve could continue to tighten monetary policy for a while. At the same time, the yen was hurt by news that Bank of Japan Deputy Governor Masayoshi Amamiya would be the next governor.

The Nikkei newspaper quoted undisclosed government and party sources as saying that the administration of Prime Minister Fumio Kishida is in the final stages of deciding on a successor to the current governor, Haruhiko Kuroda, as well as two new deputy governors. After the report, the Japanese yen fell to its lowest level in three weeks to 132.60 per dollar. Amamiya played a crucial role in formulating the Kuroda asset purchase program in 2013 and has consistently advocated maintaining ultra-low interest rates. But he also said in July that the BoJ should always think of ways out of ultra-loose monetary policy.

The dollar continued its rise today, Monday, as it touched its highest level in four weeks against a basket of currencies, recording 103.22. The euro fell 0.09% to $1.0783, while the British pound last traded at $1.203, down 0.17% during the day, its lowest level since January 6th. The Australian dollar fell 0.14% to $0.6912, while the New Zealand dollar fell 0.33% to $0.6310.

Gold Falls to its Lowest Level in 4 weeks as the Dollar Trends Higher.

Gold prices fell to their lowest level in more than four weeks, Monday, February 6, as the dollar stabilized after stronger-than-expected jobs data raised concerns that the Federal Reserve will continue to raise interest rates. There was little change in the price of gold at 1865.88 dollars an ounce after it reached its lowest level since January 6, earlier in the session. US gold futures rose 0.2% to $1,879.40. The dollar index rose 0.2%, making gold less attractive to buyers holding other currencies.

Data on Friday showed job growth in the United States accelerated sharply last month, with non-farm payrolls rising by 517,000 jobs, well above an estimated 185,000. The unemployment rate fell to 3.4%, its lowest level in 53 years.

As for other precious metals, the spot silver price fell 0.5% to $22.24 an ounce, platinum fell 0.1% to $973.04, and palladium fell 0.5% to $1616.54.

Elon Musk Acquitted from Fraud Charges.

The jury in a San Francisco court has found billionaire Elon Musk not guilty of the fraud case brought by Tesla investors over tweets dating back to 2018. Musk tweeted about obtaining “secured financing” to take Tesla private and divest its shares from the stock exchange.

Tesla investors filed a lawsuit against Elon Musk, accusing him of misleading them and causing them to lose millions of dollars. Elon Musk had said in the tweet that caused him to be brought into the dock, “I am thinking of Tesla becoming a private company at an estimated share price of $ 420 and financing is guaranteed.”

It was only for investors to flock to buy the company’s shares to take advantage of the plan, after which the stock fluctuated, and the investors lost millions. Musk tweeted that he appreciated the jury’s decision to acquit him of this charge.

The Price Ceiling on Russian Oil Derivatives is in Action.

The concern is growing in energy markets about price turmoil in the coming months after Western countries imposed new sanctions on the Russian oil and gas sector. Yesterday, the European Union, the Group of Seven, and Australia applied a price cap on Russia’s oil derivatives. The price ceiling was set based on $100 a barrel for oil derivatives with a price premium, such as diesel, and $45 a barrel for lower-quality oil derivatives traded at a discount, such as fuel oil and naphtha. This ceiling is scheduled to be reviewed next March.

For his part, said the head of commodity research at Goldman Sachs, “Jeff Currie,” the most likely scenario is the loss of about 600 thousand barrels per day of supplies due to the difficulty in redirecting derivatives. Currie added that redirecting crude is relatively easy by bringing a tanker from a scrap market from somewhere in the world, bringing it a Chinese insurance policy, filling it, and then heading to somewhere like India, where the derivatives are refined and then transported to Europe or the United States. However, you can only do that with derivatives if they are finished products, so transportation is unavailable. Also, it will be challenging to redirect the derivatives as we saw in crude. So we expect that to result in a decrease of 600 thousand barrels per day in supplies.”

Notably, these sanctions are not the first on the Russian energy sector. Last December, Western countries implemented an embargo on Russian oil transported by sea. Also, they set a price ceiling at $60 a barrel for Urals crude exports to limit its revenues due to the war in Ukraine. The European Union estimated that the price ceilings cost Russia $175 million a day.

The Russian response was to stop the oil supply from the beginning of this month to the countries that imposed a price ceiling until next July. In turn, Deputy Prime Minister Alexander Novak said that this step limits the impact of those sanctions on the oil markets, which are witnessing a state of uncertainty with what it is going through challenges of the global economy.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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