US Dollar Outlook Weakens as August US NFP Misses Expectations

US Jobs Report Overview

• Headline jobs growth comes in at 130K, much weaker than the 164K anticipated. There was a notable -20K net two-month revision as well.
• The unemployment rate (U3) held at 3.7% even as the labor force participation rate jumped to 63.2% - in tandem, a good sign for the US labor market.
• The US Dollar initially fell as the lack of topline growth amid the US-China trade war may provoke reinforce that the US economy, while resilient, is slowing down.

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The August US nonfarm payrolls report has arrived amid a détente in the US-China trade war, putting into question just how far the Federal Reserve will cut rates when it meets on September 18. Unfortunately, the most recent US jobs report will not provide much clarity or help for Fed officials in making a decisive action.

The headline August US NFP yielded 130K, missing the consensus Bloomberg News consensus forecast of 160K. There was a meaningful give back in the two-month revision, down by -20K. Otherwise, other aspects of the report could be deemed ‘good, not great’. Wage growth fell from 3.3% to 3.2% (y/y). But the unemployment rate (U3) held at 3.7% even as the labor force participation rate jumped to 63.2% from 63% - in tandem, a good sign for the US labor market.

The US Dollar initially fell as the lack of topline growth amid the US-China trade war may provoke reinforce that the US economy, while resilient, is slowing down.Here are the US jobs data driving the greenback this morning:

- USD Unemployment Rate (AUG): 3.7% as expected, unch.

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

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

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

See the DailyFX forex economic calendar for Friday, September 6, 2019

DXY Index Technical Analysis: 1-minute Rate Chart (Intraday September 6, 2019)

Following the US jobs report release today, the DXY Index immediately fell, losing ground from 98.44 to as low as 98.29 thereafter. At the time this report was written, the DXY Index was claw back some of its losses, holding at 98.33 at the time this report was written – coincidentally, the same exact level the DXY Index was trading at after the July US jobs report.

Read more: US Recession Watch, September 2019 - Growth Weak Even as US Treasury Yield Curve Steepens

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

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

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