NFP data did little to change expectations of a rate hike in December

AFTER THE RELEASE:

"Despite all the economic cheerleading about the allegedly strengthening economy, I see things differently. Job growth is shrinking. Average the last two months to smooth out the hurricanes and you get growth job growth of 114,000. For now, it's still positive." by Mike “Mish” Shedlock's

"While Friday's bearish outside day post US NFP hints at risks for further downside pressure, the trajectory in the 10y DE vs US yield spread/curve does not seem to justify lower prices at this stage. " by Ivan Delgado

"The Euro is under further pressure today against its US counterpart after suffering heavy losses on Friday on the back of strong data from the US and the potential for further falls in the coming days and weeks remains strong.
The latest nonfarm payrolls figure from America hit the market on Friday at 261,000 while the unemployment rate hit 4.1 percent which continues the positive momentum of the employment market." by Andrew Masters

"USD was holding onto recent gains against the major pairs as markets believed that despite the softer-than-expoecte jobs data on Friday there was little change in market expectations for the Fed to raise interest rates in December for a third time this year" by TradeTheNews.com Staff

"NFP rose by 261k missing expectations for 313k. Average hourly earnings disappointed, coming in flat versus expectations for 0.2% rise. The jobless rate fell to 4.1% versus 4.2%." by ABL Team

"The Labour department revealed that the US job growth sped up in October, while the yearly wage growth as well as participation rate fell in the reported period, clouding the outlook of the job market. The report showed that the country’s economy added 261K jobs in the reported period, missing forecasts for a 310K increase. The weak pay growth is likely to hamper inflation to reach 2% target." by  Dukascopy Bank Team

"The US nonfarm payrolls (NFP) data were perceived as being strong, although the October figure missed the analysts’ ambitious estimate of 313K on hurricane rebound. The US economy added 216K new nonfarm jobs in October, versus -33K printed a month earlier. The August and September figures were revised higher as well, suggesting that the improvement in the US labour market remains satisfactory after the hurricane impact is filtered out." by Ipek Ozkardeskaya

"US nonfarm payrolls advanced 261k in October, missing the earlier estimate of 313k. The unemployment rate unexpectedly declined to 4.1%, the lowest in 17 years! The low unemployment rate indicates the Fed could act more hawkish in the next few months. We forecast the US interest rates will be 1.75% by March next year, with two rate hikes in December and March." by Wayne Ko Heng Whye

"The US dollar closed last Friday on a stronger note as the US nonfarm payrolls showed a rebound. The US economy was seen adding 261k jobs during October with September and August payrolls numbers being revised higher as well. The unemployment rate fell to fresh lows at 4.1%, but average hourly earnings remained muted. The ISM non-manufacturing PMI was seen rising to 60.1, beating expectations of 58.5." by John Benjamin

"Data released on Friday showed US job growth accelerated in October after hurricane-related disruptions in the prior month, but a sharp retreat in average earnings and an increase in the number of people leaving the workforce caused concern on the robustness of the labor market. Nonfarm payrolls increased by 261K in October as 106K leisure and hospitality workers returned to work. This was the largest gain since July 2016 but below forecasts of an increase of 310K. The data for September was revised to show a gain of 18K jobs instead of the previously reported decline of 33K. Average hourly earnings disappointed the markets, falling by 1%. The reduction results in the year-on-year increase dropping to 2.4%, the smallest since February 2016. In September earnings increased 0.5% lifting the annual increase in that month to 2.9%. Whilst the data was below forecasts, the job growth underscored the recent Fed statement that “the labor market has continued to strengthen” and has done little to change expectations of a rate hike in December. More upbeat data came in the form of the unemployment rate at 4.1%, a rate not seen in 17 years. " by Team FxPro

BEFORE THE RELEASE:

"Interestingly, the range of economist estimates as measured by Bloomberg for this report was also wide, the lowest estimate was 120k while the highest was 400k. Thus, we would view all predictions with a pinch of salt this month, and Friday’s reading could trigger a whipsaw market reaction when the data comes out.
[...] Due to the risks around trading tomorrow’s announcement, it may be better to wait for the dust to settle before opening a new position. If we get a much stronger number than expected then we could see the dollar index break the 95.00 mark, USD/JPY test 115.00 resistance and GBP/USD fall further to 1.30. However, 1.3020- the 38.2% retracement of the Jan low to Sept high in GBP/USD is a major level of support, so after today’s decline in the pound there may not be too much room for further downside. If we get a weaker number than expected, say of 250k or lower, then we could see the dollar struggle, which opens the way for a move back to the 112.90 low from Tuesday in USD/JPY, and a recovery in GBP/USD to 1.3150 mark." by Kathleen Brooks

" The greenback was supported by news on the decline in the initial jobless claims in the US to 229,000 from the expected 235,000 thousand." by OctaFx Analyst Team

"U.S. nonfarm productivity rose at an annual pace of 3 percent in the third quarter, versus economists’ expectations for a 2.4 percent gain. Unit labor costs increased 0.5 percent for the third quarter." by Benzinga Team

"The ADP survey released last Wednesday suggests that the upcoming numbers will be strong, as according to it, the private sector added 235K new jobs in October, largely above a previous revised to 110K or the expected 200K. Anyway, a reading above the expected 312K seems unlikely as it's too high, but anything above 240K should be considered dollar positive. Wages, as usual, will be key as a decline there will probably hit the greenback, as wages are correlated to consumption and therefore inflation." by Valeria Bednarik

"Productivity and unit labor costs might get lost in the shuffle. Productivity is forecast to be above-trend but unit labor costs to remain modest. The flip side of unit labor costs is labor earnings, and without them, the inflation outlook remains tame." by  Barbara Rockefeller

"Having seen surprise job losses last month, the needle is set to swing the other way with massive job gains. In addition to likely revisions, this could be a report that sees algo-driven volatility on the announcement but once the dust settles, the market pays little real regard to. [...] Coming after a huge miss last month down to -33,000 this is a wild swing back higher in job creation. Expect significant revisions to prior months, but also reading into the implications of the headline numbers will be a tricky task. Focus could therefore come on the Average Hourly Earnings which are especially in vogue at the moment, with the with Phillips Curve gaining so much attention. Wages are expected to have risen by +0.2% for the month (down from +0.5% last month) and +2.7% for the year (down from +2.9%). Also look at the unemployment rate which is expected to stick at 4.2%, but also the U6 underemployment which fell from 8.6% to 8.3% last month. Also the laborforce participation rate is key having increased sharply last month to 63.1% which was the highest since May 2014." by Richard Perry

"Following September's hurricanes impacted report, the headline number is anticipated to rebound sharply and show that the economy added over 300K new jobs in October. Heading into the key event risk, repositioning trade would be a key determinant of the pair's momentum [EUR/USD]  amid a data-empty European economic docket." by Haresh Menghani

"The consensus expectations for Friday’s non-farm payrolls data are currently running slightly higher than 300,000 jobs added in October, the highest monthly forecast in over seven years. Clearly, markets are very optimistic in expecting such an aggressive bounce-back in employment data. The October unemployment rate is expected to have remained low and steady from the previous month at 4.2%, while average hourly earnings are expected to have increased by 0.2% against the previous month’s better-than-expected showing of 0.5% wage growth.

With such high expectations for the headline job creation data, it will clearly be easier for the actual outcome to disappoint. However, even if the numbers fall somewhat short of expectations, which is a distinct possibility, any negative impact on the US dollar is likely to be limited. Conversely, if the reading actually beats the high expectations, which would help support the Fed’s current policy trajectory towards higher interest rates, a positive dollar impact is likely to be pronounced. In that event, the current dollar recovery may well be extended significantly further.

[...]

Wednesday’s ADP data came out substantially better than expected at 235,000 private jobs added in October against prior forecasts of around 200,000. While this strong ADP reading bodes well for Friday’s official data, whether the official NFP data beats its significantly higher forecast remains to be seen. Although the ADP report is not necessarily a very accurate pre-indicator of the official NFP jobs data from the US Labor Department – and sometimes even misses the mark dramatically – it does help provide a useful guideline when used in conjunction with other employment-related data.

One of the most important of these other indicators is the ISM manufacturing PMI employment component, which showed solid manufacturing sector job growth at 59.8 in October, albeit slightly slower than September’s 60.3. The even more critical ISM non-manufacturing (services) PMI will be released after Friday’s NFP data, so will not be considered as a pre-NFP input.

Finally, October’s weekly jobless claims have all been better (lower) than expected, and have remained exceptionally low overall from a historic perspective." by James Chen

"NonFarm payrolls are expected to come in at 313k in October after contracting 33k in September. As usual, investors will pay a close attention to wage growth with average hourly earnings anticipated to rise 2.7%y/y versus 2.9% in September. The release of the September job report will be our best and last shot to get some volatility this week. Unfortunately, the market is more focus on developments on Trump’s Tax plan, as it will have a larger impact on inflation and growth, should it be approved. In addition, investors realized that a stronger job market do not ensure, at all, sustained inflation pressures." by Arnaud Masset