US unemployment figures not as good as hoped

Since the beginning of the year, the Dollar has been on an upward trend, buoyed by manufacturing figures which outstrip those of Europe, the roll-out of the vaccination programme and the hopes awakened by President Biden’s stimulus plan. The rise in US Treasury bond rates, we have returned to pre-pandemic levels, contributed to such optimism and the rise in the Dollar’s value. This momentum was stopped in its tracks last Friday, with the publication of unemployment figures which were not as good as hoped. There had been expectations of at least 105,000 new jobs in January, but the reality was only 49,000 new jobs, mainly in the public sector. The figures for the previous two months were also revised downwards, casting a spotlight on the current difficulties of the service sector. Following this, the Greenback, which had dipped below 1.20 to the Euro (reaching a high of 1.1952 on 5 February), has bucked this trend and is now above 1.21 to the Euro. US bond yields were for their part slightly less impacted by this bad news, with Janet Yellen declaring that the United States could anticipate a return to full employment in 2022, should the stimulus package in the US be extensive enough. The ten-year yield hit a high point of 1.1981 % and the 30-year yield reached 2 % before retreating to 1.1586% and 1.9493% respectively.  The US stimulus plan (and its size) remain subjects of particular interest to the markets. Nonetheless certain dissenting voices are making themselves heard, like that of economist Larry Summers, who has nonetheless a close relationship to the Democratic party and who warns that too robust a stimulus package could set off strong inflationary pressures and create a stock market bubble.

On this side of the Atlantic, the risk of inflation is deemed moderate, despite January seeing a rise in inflation. Christine Lagarde views such rise as exceptional and has restated her intention to extend massive support to the Eurozone economy. Her predecessor at the ECB, Mario Draghi, has been appointed the future Prime Minister of Italy and is now endeavouring to put together a parliamentary majority which will allow him to introduce a structural reform programme. The markets appear to like this prospect, as the Italian 10-year government bond yield has fallen to 0.5 %, a historical low. At the height of the crisis last year, such rate was close to 3 %. Sweden’s central bank holds its monetary policy meeting this morning. The markets are expecting it to leave its interest rates unchanged at 0 % and not to modify its asset buyback programme. It will however be interesting to see if its future interest rate projections change. At its last meeting at the end of November, the Riksbank foresaw holding its rates steady until the end of 2023.

On the precious metals market, silver is rallying after a week where it hit $25.90 at its lowest. It now stands at $27.37 an ounce. Gold is profiting from the weakness of the Dollar, bouncing back to $1,845, and for now is not reacting to the rise in US rates. But this morning platinum stole the show, hitting its highest price for six years. This precious metal is sometimes used as a substitute for gold in jewellery or in the construction of catalytic converters for combustion engines, making possible compliance with the new environmental standards.

The price of Brent Crude has cleared $60 a barrel for the first time a year, due to the combined effect of further falls in production and the fall-off in capital investment in the sector. The price of oil therefore continues its ascent and is erasing its pandemic-related losses, even though travel restrictions remain in place in numerous countries. Currencies sensitive to the price of crude (for example the CAD and RUB) have been the main beneficiaries of this increase in recent days.