Non-Farm Payrolls rose by 192K, quite in line with expectations. Yet again, we got a nice surprise from the unemployment rate, that fell to 8.9%. The initial reaction is a small retreat of the dollar – EUR/USD passed 1.40 but fell below it. The final direction may change later.
The real unemployment rate, which also takes discouraged people into account, fell to 15.9%. Average Hourly Earnings has remained unchanged, falling short of expectations for a rise of 0.2%.
In the past three months, Non-Farm Payrolls were a big disappointment. We didn’t get another disappointing number, but neither a big surprise. Economists’ consensus was quite right this time. As it happened in previous months, the outcome of earlier publications was revised to the upside – It’s now reported that the US saw gains of 63,000 jobs in January, better than 36,000 initially reported.
After the first choppy moves, the dollar is slightly weaker than earlier, but very marginally so. The US dollar is more successful against the Japanese yen – as the Euro got a boost yesterday from Jean-Claude Trichet, USD/JPY better reflects the situation in the US economy. The pair is on the rise and even briefly passed the 83 line.
GBP/USD is dropping after an initial rise. Britain’s services sector is still weighing on the economy, making the pound more vulnerable to improvements in the US economy.
As written in the NFP preview, expectations were high for the Non-Farm Payrolls – all the indicators leading to the publication were positive – this includes more drops in weekly jobless claims. The 4-week moving average dropped below 400K – levels seen before the financial crisis. Manufacturing and service PMIs are showing strong growth. Also the ADP report for the private sector continued to show strength.
The unemployment rate also became more important in recent months, as it’s falling. The drop to 9% last month, with a drop of the real unemployment rate, U-6 to “only” 16.1%, also aided the dollar and compensated for the Non-Farm Payrolls that saw a rise of only 36000 jobs and was revised now.
For more technical levels on specific currencies, see:Get the 5 most predictable currency pairs