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NFP Misses Headline Number, Decent Internals; USD Bid

NFP Misses Headline Number, Decent Internals; USD Bid

James Stanley, Senior Strategist

Talking Points:

- US economy added +151K jobs in January, -39K below the forecast of +190k.

- Unemployment rate drops to 4.9%, wage growth at +2.5% y/y versus expectation of +2.2%.

- EURUSD traded between $1.1142 and $1.1253 after the data.

The January US labor market report came in under expectations with a print of +151K jobs added to American payrolls for the month of January. This was -39k below expectations, and -43k below our own regression model estimates. After last month’s outsized beat, markets experienced significant turbulence throughout the month of January and this was the first look that we get at how much of an impact that may have had on the American labor force. The increase in wage growth and the drop in the unemployment rate are the positive take-aways from this morning’s report despite the miss on the headline number, and some sources are already allocating that miss towards a response to holiday hiring. As seasonal jobs get filled for the holidays, those payrolls come off the books in January and can offset newly added jobs. Those jobs, by nature, are low-paying, so the uptick in wage growth is encouraging.

Here are the data that’s bringing volatility into the Forex market this morning:

- USD Change in Nonfarm Payrolls (JAN): +151K versus +190K expected

- USD Unemployment Rate (JAN): 4.9% versus 5.0% expected.

- USD Average Hourly Earnings (JAN): +2.5% versus +2.2 expectated.

- USD Labor Force Participation (JAN): 62.7% versus 62.6% expected.

The net result thus far has been USD-strength, and we’ve seen a rather vigorous bounce off of a long-term trend-line. This trend-line came into play yesterday and we discussed it in the morning market talk. During NFP this morning, the US Dollar ran down for another test of this trend-line, and has since set a higher-low. This can be a bullish connotation that the weakness in the US Dollar throughout this week may have met it’s end, or at the very least is at a very interesting turning point as the United States remains as one of the few economies in a position that may actually raise rates in the next year. This morning’s report did nothing to diminish that prospect, and given the massive reduction in rate hike expectations that we’ve seen this week, this morning’s report may actually increase those probabilities given the reduction in the unemployment rate and the increase in wage growth.

Chart 1: USDOLLAR Index Daily Chart: January 2015 to Present

NFP Misses Headline Number, Decent Internals; USD Bid

Created with Marketscope/Trading Station II; prepared by James Stanley

Missed today's US Nonfarm Payrolls report? Watch the webinar archive of today's live event coverage with Currency Strategist Christopher Vecchio.

--- Written by James Stanley, Analyst for DailyFX.com

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