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'Goldilocks' US NFPs Keep EUR/USD Steady; Fed Rate Hike a "Lock"

'Goldilocks' US NFPs Keep EUR/USD Steady; Fed Rate Hike a "Lock"

2015-12-04 13:15:00
Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- US economy added +211K jobs in November, +17K above the forecast.

- Unemployment rate holds, wage growth retrenches back to +2.3%.

- EURUSD trades between $1.0863 and $1.0944.

Mark your calendar for December 16: markets are honing in for the first Federal Reserve rate hike in two weeks after the November US Nonfarm Payrolls report. The data, which was truly a ‘Goldilocks’ print – not too hot, not too cold – confirmed recent labor market trends that should keep the Federal Reserve confident enough that the US economy is continuing to heal.

Yet, with the prints hitting expectations on the nose, there’s little implication for beyond 2015: markets are still pricing in only two rate hikes in 2016, as it was before the US jobs data were released this morning (although, the rate hikes are now seen in April and November, as opposed to June and December):

Table 1: Fed Funds Futures Contract Implied Probabilities

'Goldilocks' US NFPs Keep EUR/USD Steady; Fed Rate Hike a "Lock"

Accordingly, as articulated in this morning’s NFP preview, it seemed that only a blowout NFP report, in context of recent Fed commentary, would lead to a significant rebound in the USDOLLAR Index. Indeed, it appears that without a further firming of future rate expectations (markets pricing year-end Fed benchmark rate just above 1.00% now), the expectation of a dovish liftoff at the December meeting remains. If you haven’t read it, you should read our report that speaks directly to the issues for the US Dollar surrounding the December FOMC meeting: “Fed Rate Hike Cycle Doesn’t Necessarily Bode Well for US Dollar.”

Here are the data that’s whipping the US Dollar back and forth this morning:

- USD Change in Nonfarm Payrolls (NOV): +211K versus +200K expected, from +298K (revised higher from +271K).

- USD Unemployment Rate (NOV): 5.0% as expected unch.

- USD Average Hourly Earnings (NOV): +2.3% versus +2.3% as expected, from +2.5% (y/y).

- USD Labor Force Participation (NOV): 62.5% versus 62.4% expected unch.

See the DailyFX economic calendar for Friday, December 04, 2015

Chart 1: EURUSD 1-minute Chart: December 4, 2015 Intraday

'Goldilocks' US NFPs Keep EUR/USD Steady; Fed Rate Hike a "Lock"

While EUR/USD initially ranged between $1.0863 and $1.0944, it was soon pressing the topside of its post-NFP range, trading at $1.0931 at the time this report was written. Heading into and after the meeting, the retail crowd was maintaing a net-short EUR/USD bias, which suggests that further gains remain likely.

Read more: Preview for November US NFPs and Implications for December FOMC

Lastly, as we approach the holidays and thus less liquid markets through the end of the year, it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders."

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX

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