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Talking Points:

- February NFPs beat modestly at +175K, but Unemployment Rate rises to 6.7%.

- US Dollar initially higher; Yen weakens across the board broadly.

- US 10-year Yield surges to 2.813% from pre-release low of 2.713%.

The February US labor market report was widely anticipated to come in weaker than expected in light of several disappointing data releases over the past several weeks. The major question on everyone’s mind – “is the weather having an impact on the economy?” - may be finding an answer. ‘Yes – to an extent.’

The jobs growth of +175K in February was better than the Bloomberg News consensus forecast anticipated, and the rise in the Unemployment Rate isn’t necessarily a poor indication of the state of the economy. Although the Unemployment Rate ticked higher by +0.1% to 6.7%, the labor force increased by +264K: more and more Americans are looking for work. This bucks the trend seen in the highly correlated ISM Services report.

Another important point to look to in this report is the jump in wages. Average Hourly Earnings increased by +0.4% m/m, the fastest pace since June 2013. This was double the 12-month average of +0.2%, and was only the fifth time since 2009 that wage growth has been increasing at such a pace. This could be an indication that the labor market is getting tighter.

Here’s the data sending the US Dollar on a ride:

- Change in Nonfarm Payrolls (FEB): +175K versus +150K expected, from +129K (revised higher from +113K).

- Change in Private Payrolls (FEB): +162K versus +145K expected, from +145K (revised higher from +142K).

- Unemployment Rate (FEB): 6.7% versus 6.6% expected unch.

- Participation Rate (FEB): 63.0% unch.

See the US Dollar economic calendar for Friday, March 07, 2014.

Blame_the_Weather_USDJPY_Clears_10350_on_February_NFPs_Beat_body_Chart_1.png, Blame the Weather? USD/JPY Clears ¥103.50 on February NFPs Beat

US yields have been hammered the past several weeks (bond prices increasing), and the better than aexpected jobs data initially provoked a steepening of the yield curve (when bonds with longer duration see their yields increase at a faster rate than the shorter-end of the yield curve).

USDJPY 1-minute Chart: March 7, 2014 Intraday

Blame_the_Weather_USDJPY_Clears_10350_on_February_NFPs_Beat_body_x0000_i1028.png, Blame the Weather? USD/JPY Clears ¥103.50 on February NFPs Beat

Charts Created using Marketscopeprepared by Christopher Vecchio

The rise in the US 10-year Treasury Note yield to 2.813% also dragged USDJPY from near ¥102.85 ahead of the release to over 103.50. The USDJPY was trading at 103.58 at the time this report was written.

--- Written by Christopher Vecchio, Currency Analyst

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