Forecasters are having a hard time quantifying the impact of the pandemic on the economy

US non-farm payroll figures for the month of April were undoubtedly the highlight of last week. While forecasts had counted on close to one million new jobs, the number came out far below expectations with only 266,000 jobs created in the country. The previous two months were also revised downwards by 78,000 jobs. US unemployment now stands at 6.1%, while most analysts saw it in the range between 5.8 and 6.0% The news came as shock to the market, to say the least. Forecasts rarely miss the mark by this much. It may be that forecasters are having a hard time quantifying the impact of the pandemic on the economy. US sovereign yields immediately dropped 8 basis points before recovering, but it was the US dollar that took most of the brunt as the EURUSD parity jumped a full cent from 1.2060 to 1.2160. With respect to the Swiss franc, the greenback tested the support at 0.90 before rebounding. Even though the economy as a whole is growing again, employment is lagging behind. It is not for a lack of job openings, which stood at a record 8 million in March, up 600,000 from February. It is qualified labour that is in short supply. A certain number of people could conceivably prefer to continue to benefit from government aid and wait for a real improvement in the health situation before returning to work. And maybe the figures will be revised upwards next month as it happens frequently. Either way, these poor employment figures are pushing back the prospect of short-term monetary tightening, despite rising inflation. For many weeks now, Fed members have been saying that it would be premature to mess with interest rates before the negative effects of the crisis on employment have dissipated. The US still has a long way to go. To be specific, it has to create 7.3 million jobs to get back to pre-pandemic levels. Production is nevertheless picking up. The global manufacturing Purchasing Managers’ Index hit an 11-year high in April, at 55.8 points. Despite rising costs and longer delivery times, purchasing managers are taking orders and stepping up their production capacity. In Switzerland, the PMI reached an all-time high of 69.5 points. In England, the PMI for the service sector rose to 61 from 56.3 previously.

In the world of foreign exchange, the US dollar has continued to weaken in recent days due to the poor non-farm payroll figures we mentioned above. It was trading at 1.2122 against the euro this morning, against 1.2015 a week ago. The parity climbed to a high of 1.2182 before the dollar strengthened against as the fighting between Israelis and Palestinians intensified. Aside from the dollar, we must also highlight the performance of three currencies: the pound sterling, the Canadian dollar and the Swiss franc. Let’s start with the pound sterling. Last week, the Bank of England held its interest rate steady at 0.10% as expected. Above all, it sharply raised its growth forecast for this year to 7.25%, up from the 5% expected in February. Without touching the budget allocated to asset repurchases, it hinted that a tapering was forthcoming. On the political front, local elections were held in the UK. The Scottish Independence Party won the election but missed an absolute parliamentary majority by one vote. This makes the route to a Scottish independence referendum, which Boris Johnson firmly refuses, more difficult. In those same elections, the Prime Minister’s Conservative Party performed well to the detriment of Labour, especially in areas that voted for Brexit. Investors, reassured by political stability and good economic news, are pushing the pound above $1.41. The Canadian dollar, for its part, is approaching the 1.20 mark. One US dollar currently buys 1.21 Canadian dollars, the lowest since August 2017. As a reminder, the central bank of Canada was the first to taper its asset purchases. The Canadian currency is also being driven by the weakness of the US dollar and the rise in commodity prices. The Swiss franc is also strengthening, driven by record economic indicators: the KOF economic barometer is at its highest since 2008, purchasing managers’ indices are also at a historic high and the unemployment rate is down to 3.3%. Earlier this week, the EUR/CHF exchange rate slipped to a low of 1.0927 and the USD/CHF parity made a foray below 0.90.

The ounce of gold again crossed the $1,800 mark to return to the level of last February, a moderate upward movement which is also affecting other precious metals. WTI oil is once again trading high at $65.66 and agricultural commodity prices are still rising sharply since the start of the year. Global stock markets have gone through a bit of an air pocket in recent days, with the SMI in particular breaking below 11,000 points and the Nasdaq losing 2.5% on Monday. The rise in inflation continues to be a source of concern for the markets and is having an impact in particular on technology stocks. The US 10-year yield is back above 1.6% after a brief drop to 1.46% last Friday following the announcement of unemployment figures.