US Dollar Eases Back as July NFPs Disappoint High Expectations
- July NFPs miss slightly at +209K, Unemployment Rate drops to 6.2%.
- US Dollar absorbs losses after ‘weaker’ data; payroll growth eclipses +200K for sixth straight month.
- EURUSD holds below $1.3400, USDJPY flirts with ¥103.00.
The July US Nonfarm Payrolls report wasn’t as good as market participants could have hoped for, but it was still a strong report. The sixth consecutive month of jobs growth above +200K, the first time since the late-1990s, underscores the underlying momentum in the US labor market.
Although the unemployment rate rose by one-tenth of one percent to 6.2%, the gain comes on the back of the labor force participation rate increasing by the same increment to 62.9%. That’s to say, more participants are entering the labor market as jobs growth remains strong. Seasonally, the July jobs data is strong: in the five years prior (2009-2013), NFPs averaged +5.4K (standard deviation of +205.9K).
After a strong run higher, the US Dollar is trading mixed around the data and US yields are eased off slightly. Here’s a look at the data:
- Change in Nonfarm Payrolls (JUL): +209K versus +215K expected, from +298K (revised higher from +2288K).
- Change in Private Payrolls (JUL): +198K versus +227K expected, from +270K (revised higher from +262K).
- Unemployment rate (JUL): 6.2% versus 6.1 % expected unch.
- Participation Rate (JUL): 62.9% from 62.8%.
US yields have started to rise over the past week, but losses seen in the belly of the yield curve (3Y-7Y) today are supporting a modest pullback US Dollar. This flattening of the middle and long portions of the yield curve has proven to be US Dollar negative.
EURUSD 1-minute Chart: August 1, 2014 Intraday
Charts Created using Marketscope – prepared by Christopher Vecchio
With US yields moving lower, the US Dollar has seen losses develop across the majors, in particular against the Euro. The EURUSD traded in a 45-pip range around the announcement, rallying from below $1.3400 to as high as $1.3433 after the announcement. After a return back below $1.3390, the pair was last seen at $1.3425.
--- Written by Christopher Vecchio, Currency Analyst
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