The government data on the US labor market published on Friday interrupted the victorious pace of robust employment in the US economy since the end of last year. Strong NFPs previously became one of the reasons for the Federal Reserve's actual refusal to start cutting interest rates this year.

The April report for the number of new jobs released on Friday turned out to be way lower than predicted. Thus, the consensus assumed the increase in new jobs to 238,000, as well as maintaining the unemployment rate at the previous level of 3.8%. In practice, the nonfarm payrolls turned out to be not so optimistic. In April, the US economy added just 175,000 new jobs, and the unemployment rate rose to 3.9%. Besides, average hourly earnings slowed the pace of annual growth to 3.9% from 4.1%, and in monthly terms wages slipped to 0.2% from 0.3%.

How markets respond to such news

The US dollar weakened, which came as no surprise in such situations, when lower-than-expected employment figures come out. The greenback either rises sharply against major currencies or falls. On Friday, as expected, growth was limited, and its weakening in trading on Monday morning was not supported, at least not yet. The US dollar index is currently trading below 105.00 points.

But stock markets reacted to this news with notable optimism, which seems to be based on two pillars. The first is the assurance of Fed Chairman Jerome Powell that the central bank does not plan to raise interest rates, and the second is the revival of hopes that the growth curve in the number of new jobs and everything that accompanied it has reached a certain point. As a result, we can expect a slowdown in the upward trend, which could lead to a decline in inflation. In turn, the Federal Reserve will again raise the issue of rate cuts in the second half of this year.

Is it a good idea to price in these scenarios?

I guess not yet. The weakening of the US dollar, the decline in Treasury yields, and growing demand for stocks may turn out to be temporary. Most likely, market is likely to revise its sentiment only when data on consumer inflation shows lower figures. Meanwhile, growth or decline in inflation will be based only on expectations and nothing more.

What market sentiment will prevail today

I believe the odds are that market participants will maintain Friday's trend. The empty economic calendar today will hardly contribute to this. Markets are going to shape sentiment based on internal stories rather than strong external factors.

Intraday outlook

USD/JPY

The currency pair remains under strong pressure in the wake of currency interventions from the Bank of Japan. If the instrument does not rise above 154.00, then the price may fall to 152.00 due to a temporary weakening of interest in the US dollar.

XAU/USD

Spot gold price may find support after breaking through the resistance level of $2,325.00 and rebound towards $2,353.25.