Dollar drops as US hiring plummets, But NFP may not be as bad as it first looks
|-
20K jobs created vs. 180k expected
-
Unemployment -0.2% to 3.8% vs. 3.9% expected
-
Wages 3.4% yoy vs. 3.3% expected
-
Dec. revised higher from 220k to 227k
-
Jan. revised higher from 304k to 306k
Dollar & sold off in a knee jerk reaction, Dow futures & S&P futures extended losses.
-
EUR/USD + 0.3 % at $1.1230,
-
Dow futures down 200 points at 25273
-
S&P futures -0.7% at 2729
Risk off dominated heading into the NFP report on global growth concerns. The ECB’s dismal outlook for the eurozone, combined with weak data from China overnight fuelled fears over the outlook for the global economy.
The headline US jobs figures was much worse than forecast, heightening concerns over the health of the US economy whilst sending the dollar and US equities tumbling lower.
December’s headline figure and January’s, which were both already high were revised upwards. Despite February’s odd number the average across three months is 184K, which is approximately what would be expected around this stage of the economic cycle. Let’s be honest, after two outstanding months a payback month is not so unreasonable.
A bright spot in the report was the wage increase. 3.4% is the highest level of wages increase since April 2009. This, along with the falling rate of unemployment indicates that the US labour market is tightening. Wages are increasing which will increase inflationary pressures.
Dollar still a buy
There was always going to be some noise surrounding this report given the US government shutdown. The headline figure was eye-catchingly bad, which resulted in a strong knee jerk reaction from the markets. However, there were also some bright spots such as wage growth, unemployment rate and upward revisions of previous months. Importantly, the three-month average is still where we would expect it to be.
The dollar is the best of a bad bunch right now. The ECB turned decidedly dovish, China downgraded its growth outlook, the pound is overwhelmed by Brexit uncertainty. The list goes on, the BoC removed its hawkish bias, the BoJ and RBA also have tilted towards the dovish end of the spectrum.
Whilst the Fed are pausing on hikes, as this report shows inflationary pressures are increasing in the US economy. This puts the dollar ahead of its rivals.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.