Image Source: Pixabay
Silver (XAG/USD) trades higher on Wednesday, hovering around $83.90 at the time of writing, up 3.65% on the day. The white metal maintains a constructive tone after absorbing the initial pressure triggered by the release of a solid US employment report, which briefly supported the US Dollar (USD).
The January US Employment Situation Report points to a more resilient labor market than expected. Nonfarm Payrolls (NFP) increased by 130K, above market expectations of around 70K and higher than December’s revised 48K. At the same time, the Unemployment Rate edged down to 4.3% from 4.4%.
On the wage front, Average Hourly Earnings rose by 0.4% MoM in January, accelerating from 0.1% in December and exceeding the 0.3% consensus forecast. On an annual basis, wage growth held steady at 3.7% YoY, slightly above expectations of 3.6%. This solid wage dynamic suggests that inflationary pressures remain present.
These figures reduce the urgency for immediate monetary easing by the Federal Reserve (Fed). Markets continue to price in around two rate cuts this year, with roughly a 49% chance of a first reduction in June, according to the CME FedWatch tool. Several Fed officials strike a cautious tone. Cleveland Fed President Beth Hammack states that policymakers could keep rates unchanged for an extended period, stressing the need for inflation to return sustainably to 2%. Meanwhile, Dallas Fed President Lorie Logan indicates that a more pronounced cooling in the labor market would be required to justify additional rate cuts.
In this context, Silver’s rebound reflects a balance between still-solid US fundamentals and lingering expectations of monetary easing over the medium term. While a firmer US Dollar may cap immediate upside potential, the prospect of real rates potentially moving lower later this year continues to underpin the appeal of precious metals such as Silver.
More By This Author:
Market Analysis For Week Of 22 February, 2015
Market Analysis For Week Of 7 Dec., 2014
Last Week Support / Resistance Trades 23 November 2014 - EUR/USD, EUR/JPY
Comments
Log in or sign up to join the conversation.