Despite the solid US employment data, the Dow Jones index retreated sharply over 180 points (-1.03%) towards 17,950, while the S&P 500 and NASDAQ also declined 0.75% and 0.65% respectively, at the time of writing. The robust employment data suggested the potential for an upcoming tightening policy from the US Federal Reserve Bank and a further strong rally for the US dollar in the short-term.
The US non-farm payrolls report revealed an additional 295,000 jobs in February beating analysts’ estimates of 235,000, while the unemployment rate dropped sharply to 5.5% in February compared to 5.7% in January, beating estimates of 5.6%. Following the release, the USD index rallied above 97.5 against a basket of currencies, weighing heavily on most commodity prices.
Crude oil prices reversed earlier gains and slid lower within the range. Brent front month futures retreated to test $60 per barrel and WTI futures declined sharply over 1.5%, below the key level of $50. Base metal prices came under renewed pressure following the recent US dollar strength as copper fell over 1.5% towards $5,740 and aluminium dropped below $1,800 in today’s afternoon session.
The euro sunk towards 1.0850 against the US dollar, despite that the ECB confirming this week that its monetary policy will stay ultra-loose in the short-term with an asset-purchase programme starting again on Monday.
In the UK, inflation expectations for 2015 declined sharply to 1.9% in February to its lowest level since late-2001, according to a new survey from the Bank of England. Sterling rallied against the euro and held above 1.3850, but remained under pressure against a strong USD.