“Payrolls posted a second consecutive blockbuster gain of 304k, smashing expectations for a revert to 165k (and our forecasts for 150k),” note TD Securities analysts.
Key quotes
“Downward revisions (including the annual benchmark revisions) however were quite substantial, totaling -70k over the prior two months with December revised to 222k vs 312k. That still left the 12-month average at an exceptional 234k. The January print was also strong across the broad, with a robust showing in construction (+52k) and broad-based strength in services (+224k). Manufacturing continued to hold on to gains, albeit softer than the prior months at +13k. This pace of job growth almost certainly cannot be sustained for long, but we and the markets continue to be surprised.”
“Quite the topline surprise for payrolls but quite the muted reaction in the USD however. We think this is reflective of a well heeded message of patience by the Fed that suggests limited scope for tightening in the near future even in the face of good data. By extension, good data should be on balance, supportive of global growth dynamics which has unambiguously slowed in recent months.”
“On balance however, we are not getting to carried away with this report. Instead, we place greater emphasis on leading indicator like the ISM release later this morning as a swing factor for FX. Here, the manufacturing/services spread has collapsed, though this is in large part due to the former and ongoing trade frictions. Nonetheless, it tends to be a solid barometer of broader growth dynamics. Overall, we retain our sell on rallies posture in USDJPY as a hedge to selective risk-on currency stance with AUDNZD and NOKSEK bullish bias.”
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