US Dollar Extremely Choppy After US Non-Farm Payrolls Fall By Least in a Year, Unemployment Rate Surges to 9.7%

US Non-farm Payrolls (Monthly Change)

Source: Bloomberg

A breakdown of the overall NFP report shows divergence from leading indicators going in to this release, as the number of job losses in the manufacturing sector increased to 63,000 from 43,000 despite the rise in ISM manufacturing during the same period, which actually reflected an expansion in business activity for the first time in nineteen months. On the other hand, service-providing employment fell by 80,000 in August, compared to a decline of 154,000 in July and 251,000 in June. At the end of the day, the surge in the unemployment rate tells us that the US economy is still struggling to gain traction, despite proclamations that the recession has ended, and as long as jobless claims are rising, there will be little impetus for consumption - which makes up more than 70 percent of GDP - to improve.

The market's reaction to the news was quite volatile, as DJIA and S&P 500 futures initially fell, then rallied, then pulled back once again. This translated into similarly wild moves in JPY, as well as in USD. At the time of writing, the DXY index had broken above Thursday's highs, but with liquidity low ahead of Monday's US market closure for the Labor Day holiday, there is a high risk of similarly choppy price action throughout the rest of the day. Traders beware.


Source: FXtrek IntelliCharts