We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Mixed
Wall Street
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Major investment bank models have touted USD selling, given the outperformance in US equities relative to its counterparts over the past month. How is this likely to impact the month-end rebalancing? Find out from @JMcQueenFX here:https://t.co/MtNrHmXZpD https://t.co/YvoHlUsdVr
  • U.S. Market Analyst at https://t.co/JsVsSmefgR, Shain Vernier covers - ✔️ Safe haven assets in volatile markets ✔️ Central banks and governments ✔️ How will commodities trade in a recession Only on Trading Global Markets Decoded #podcast. Tune in here: https://t.co/1UmEzEbwiy https://t.co/X15k6b4ZyB
  • The month of May saw equities rise across the board. The #Dow Jones and #DAX 30 will look to hold above nearby support while the #Nasdaq 100 may look to attack all-time highs. Get your #equities market update from @PeterHanksFX here: https://t.co/dQxkG68R0I https://t.co/cgfcOs14qG
  • There is a dramatic departure between yield curve pricing for a recession and other measures of near-term growth; the Q2’20 Atlanta Fed GDPNow is extremely alarming.Get your market update from @CVecchioFX here: https://t.co/eMd3T8EwDO https://t.co/56oUP6we9U
  • The #DAX has now closed the gap from the beginning of March with the index breaking above 61.8% fib at 11592. Get your DAX market update from @JMcQueenFX here: https://t.co/wr67nkxc8z https://t.co/CkxPZn1v3t
  • Emerging market currencies haven’t been treated equally by the effects of global contagion, even if most have suffered to some degree. However withdrawal of investment flows could hit them all. Get your market update from @DavidCottleFX here:https://t.co/QzNoNYgMgP https://t.co/9CV6iZt40j
  • My weekend trading video: 'S&P 500 Rises on Trump China Presser, #NFPs and Rate Decisions Ahead' https://www.dailyfx.com/forex/video/daily_news_report/2020/05/30/SP-500-Rises-on-Trump-China-Presser-NFPs-and-Rate-Decisions-Ahead.html?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/ZvoGoibzj1
  • Hopes are high for deeper European economic integration as the continent battles back from the coronavirus slowdowns – but will it hold? What impact can this have on #Euro? Find out from @JStanleyFX here: https://t.co/b9ZWRd4cTr https://t.co/gngm5tKqjz
  • The US Dollar could rise against #ASEAN currencies such as the Singapore Dollar as US-China tensions seem to escalate. The Indian Rupee is also looking ahead of local 1Q GDP data.Get your market update from @ddubrovskyFX here:https://t.co/LkEFJViPWY https://t.co/iL7xlHLBiF
  • #Gold has a short-term bullish set-up that may play nicely with USD weakening. The longer and shorter-term path of least resistance remains higher. Get your $XAUUSD technical analysis from @PaulRobinsonFX here:https://t.co/6gt3F9LuGP https://t.co/B4MVrg8f6i
Worst US Jobs Report Since September 2010 Sends US Dollar Plunging

Worst US Jobs Report Since September 2010 Sends US Dollar Plunging

2016-06-03 13:15:00
Christopher Vecchio, CFA, Senior Strategist
Share:

Talking Points:

- US Nonfarm Payrolls miss expectations significantly, priors revised lower as well.

- Unemployment Rate drops more than anticipated as labor market shrinks by more than 400K.

- EUR/USD gains sharply, USD/JPY plunges as risk takes a turn lower.

The May US labor market report wasn’t just a disappointing report, it was unequivocally the worst case scenario for the US Dollar. At 38K, the US economy added the fewest jobs since September 2010. The three-month average plunged from +181K in April to +116K in May, as another -59K jobs were lobbed off in revisions of the prior two months of data.

Disparingly, the internals of the May US labor market data did not shed positive light on why the U3 unemployment rate fell fell to 4.7% - a new cycle low. A closer look shows that the labor force has shrunk by over -800K jobs the past two months. Even adjusting for the survey quirk that counted around 35-39K Verizon workers on strike as ‘unemployed,’ there’s really no silver lining here, even if wage growth held at +2.5% y/y.

Here are the data that’s crushing the US Dollar this morning:

- USD Change in Nonfarm Payrolls (MAY): +38K versus +160K expected, from +123K (revised lower from +160K).

- USD Unemployment Rate (MAY): 4.7% versus 4.9% expected from 5.0%.

- USD Average Hourly Earnings (MAY): +2.5% versus +2.5% expected unch (y/y).

- USD Labor Force Participation (MAY): 62.6% versus 62.8% prior.

See the DailyFX economic calendar for Friday, June 3, 2016

Chart 1: USD/JPY 1-minute Chart: June 3, 2016 Intraday

Worst US Jobs Report Since September 2010 Sends US Dollar Plunging

In the immediate wake of the data, the US Dollar slid sharply across the board, erasing much of its gains over the past few weeks (via USDOLLAR Index). EUR/USD was rather strong around the print, trading from $1.1155 ahead of the release to as high as $1.1319 at the time this report was written. Likewise, USD/JPY sank from ¥108.85 to as low as ¥107.25 . With FX volatility edging higher again, it’s the right time to review risk management principles to protect your capital.

This is the type of jobs report that should give the Federal Reserve reason for pause. Markets are treating the May US labor market report like a punch in the gut to June Fed rate hike expectations. Ahead of the jobs data today, the Fed funds futures contract was implying a 22% chance of a rate hike in June. Earlier, it sunk to as low as 6%; but at the time of writing, it’s now fallen to just 2%.

This is all but the nail in the coffin for the Fed to raise rates in June, at least when viewing it from the Fed funds contract perspective. Correlation is not causation, but modern markets are adept at looking forward and discounting information; and that’s important to recognize in seeing that the Fed has never raised rates unless the Fed funds futures contract has implied at least a 60% chance of hiking rates in the front month (in this case, June).

For the Fed, this report may have also closed the window on a rate hike until at least December, if at all this year. We’ve always expressed our disbelief that the Fed would hike rates during a non-staff projections/non-press conference month, and with September being the next time the Fed would have both on the calendar after June, it seems highly unlikely that any policy tightening will be done on the doorstep of the US Presidential election. If US economic data in general turns south? I’ve raised the issue before (October 2015, April 2016, May 2016), so I’ll ask it again: at what point would the Fed consider QE4?

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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

DISCLOSURES

News & Analysis at your fingertips.