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US Dollar Rebounds as May US Jobs Report Yields Biggest Surprise Ever

US Dollar Rebounds as May US Jobs Report Yields Biggest Surprise Ever

Christopher Vecchio, CFA, Senior Strategist

US Jobs Report Overview:

  • No hyperbole here: the May US nonfarm payroll report produced the widest gap between consensus and actuals in US labor market history.
  • The V-shaped recovery in US jobs may not be that much of a surprise, considering that surveys following the April US NFP report suggested that around 80% of jobs lost were only temporary in nature.
  • The US Dollar rallied immediately after the jobs data release, a sign that the Federal Reserve’s and US government’s efforts may have pulled the US economy out of the depths of depression-like conditions.

The May US nonfarm payrolls report has upended expectations about the state of the US economy, as the world’s largest economy grapples with the economic fallout from the coronavirus pandemic. The biggest surprise in US jobs history (actuals minus expectations) comes as speculation has swirled that the US economy may due for an extremely deep, but short in duration, recession, and that a V-shaped economy will soon emerge.

The headline May US NFP yielded 2.38 million jobs, well-above the consensus Bloomberg News consensus forecast of a loss of -8 million jobs. And while the two-month net-revision showed that over 600K people were without jobs during the March to April period than previously anticipated, the unemployment rate (U3) surprised everyone by falling to 13.7% from 15%.

The V-shaped recovery in US jobs may not be that much of a surprise, though, considering that surveys following the April US NFP report suggested that around 80% of jobs lost were only temporary in nature. And while it will take a few more months to discern the signal from the noise, market participants are taking the data as a sign the worst is now behind.

The US Dollar initially rallied approvingly as the May US jobs report may be validation that the Federal Reserve’s and US government’s efforts may have pulled the US economy out of the depths of depression-like conditions.

- USD Unemployment Rate (MAY): 13.7% versus 19.7% expected, from 15%

- USD Change in Nonfarm Payrolls (MAY): 130K versus 160K expected, from 159K (revised lower from 164K).

- USD Labor Force Participation Rate (MAY): 63.2% from 63%.

- USD Average Hourly Earnings (MAY): 3.2% versus 3.0% expected, from 3.3 (y/y).

DXY PRICE INDEX TECHNICAL ANALYSIS: DAILY CHART (June 5, 2020 Intraday) (CHART 1)

US Dollar Rebounds as May US Jobs Report Yields Biggest Surprise Ever

Following the US jobs report release today, the DXY Index immediately rallied, gaining ground from 96.68 to as high as 97.03 thereafter. At the time this report was written, the DXY Index was giving back some of its gains, holding at 96.81 at the time this report was written – effectively the same level it was at two hours ahead of the US jobs report release.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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