Investors are holding their breath as they await the latest US jobs data, which could have a significant impact on the global bond and currency markets. The US non-farm payrolls report, due at 1230 GMT on Friday, is expected to show that the world’s largest economy added 170,000 jobs in September, according to a Reuters poll of economists. However, some analysts predict a higher figure, which could fuel expectations that the US Federal Reserve will keep interest rates high for longer.
This could spark another round of bond selling, which has already driven the 10-year US Treasury yield to a five-week high of 4.72%. Higher bond yields make borrowing more expensive and reduce the appeal of riskier assets such as stocks and emerging markets.
The bond rout has also boosted the US dollar, which is headed for a record 12th consecutive week of gains against a basket of major currencies. The greenback has risen to an 11-month high against the euro and a seven-month peak against the pound, as investors seek safety and higher returns.
The only currency that has resisted the dollar’s dominance is the Japanese yen, which surged on Tuesday amid speculation that the Bank of Japan had intervened to stem its weakness. The yen was steady at 148.5 per dollar on Friday. Oil prices have also eased after hitting an 11-month high last week, as supply concerns eased, and demand prospects dimmed. Brent crude futures were trading at $84.50 a barrel, down 13.5% from their peak.
The markets are hoping for a calm before the storm, but they may be disappointed if the US jobs data surprises to the upside. A strong report could signal that the US economy is resilient and inflationary pressures are building, which could prompt the Fed to tighten monetary policy further. This could have far-reaching implications for the global economy, which is already facing headwinds from China’s slowdown, rising energy costs and geopolitical tensions. Some analysts warn that higher bond yields could derail the recovery and trigger a financial crisis.
However, others argue that the bond selloff is a natural adjustment to the changing economic outlook and that it could be reversed if growth falters or inflation moderates. They also point out that the Fed has ample tools to manage the situation and that it will not act hastily or recklessly.
The US jobs data will provide a crucial clue to the Fed’s thinking and the market’s direction. Investors will be watching closely for any signs of strength or weakness in the labor market, which could determine the fate of the bond and currency markets in the coming weeks.
Source:[ Reuters]
