- The data beats lowered expectations stemming from ADP's numbers, White Hosue comments and seasonals.
- To slow raising rates, the Fed would need to see economic pain – absolutely absent at this point.
- There is no alternative to the US dollar.
Five in a row – Nonfarm Payrolls beat expectations for a fifth consecutive month, showing the resilience of the US economy. The knee-jerk dollar decline is related to a small miss in wage data, but nothing substantial.
Similar to the response to Thursday's release of the ISM Manufacturing PMI, there is room for a countertrend The big picture is positive for the dollar.
Starting with the short-term reaction, real market expectations had already been lower. ADP's private-sector jobs report showed an increase of 132,000, already lowering projections for Nonfarm Payrolls. White House spokeswoman Karine Jean-Pierre added to the cooling estimates by saying they foresee a cooldown in the labor market. Moreover, August's NFP tends to miss expectations, and some were eyeing that figure.
All these reasons imply an even higher advance for the greenback once the dust settles. The bigger picture already backs a broader dollar rally, more than the initial price action.
Just one week ago, Fed Chair Jerome Powell vowed to fight inflation and seemed fully willing to see some economic pain. His colleagues echoed him throughout the week. Fed member Neel Kashkari seemed to glee at stock market declines.
This kind of jobs report is far from "pain" – on the contrary, it only extends the winning streak of robust job growth. It is hard for somebody calling this a one-off.
Moreover, There Is No Alternative (TINA) to buying the dollar. The energy crisis is hitting the eurozone and the UK hard, while China's downturn – covid and construction related – is weighing on commodity currencies. It would take Russia to send vast amounts of gas to Europe, China to announce stimulus or a truly devasting US economic figure to send the dollar down. This NFP is not one of them.
Therefore, the dollar is set to recover from any upcoming dip and also stage a massive rally.
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