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US Non-Farm Payrolls surprised to the upside with 175K. The unemployment rate slightly disappointed with 6.7%. The US was officially expected to report gains of around 150K jobs in February, after gaining only 113K in January (before revisions). Actual expectations were probably lower after the recent disappointing buildup to the big event.

The dollar and the yen were on the defensive towards the NFP, with EUR/USD around 1.39, GBP/USD around 1.6770, AUD/USD at 0.9128, NZD/USD above 0.85 and USD/CAD under 1.10. -The dollar is stronger after the publication, with USD/JPY reaching new highs.

 Data (updated)

  • Non-Farm Payrolls:  175K  (January saw +113K  before revisions)
  • Participation Rate: 63%  (63% last month )
  • Unemployment Rate:  6.7% ,  6.6% expected  (last month 6.6% before revisions)
  • Revisions:   25K, with +9K in December and +16K in January  (+34K in January)
  • Private Sector NFP: 162K (ADP showed a gain of +139K jobs).
  • Real Unemployment Rate (U-6):  12.6 %(previous: 13.5%).
  • Employment to population ratio: 58.8%  (previous: 58.8%)
  • Average Hourly Earnings:  0.4%  +0.2% expected.
  • Average  workweek:  34.2  (Last month:  34.4 hours).

Market reaction and Analysis

  • The big winner is USD/JPY, which jumps to new highs at 103.44.
  • EUR/USD slides moderately to 1.3875. The Draghi effect is still strong.
  • GBP/USD is down about 30 pips to 1.6740.
  • AUD/USD is down, clinging onto 0.91. NZD/USD loses the 0.85 line.
  • USD/CAD jumps around 100 pips, but this is also due to the poor Canadian jobs report.

So, is the good NFP especially strong, overcoming bad weather? Or is it distorted, this time to the upside?

US trade balance came out as expected at 39.1 billion in January after 38.7 billion in December 2013 (before revisions).

Background

Expectations towards the Non-Farm Payrolls for February dropped after a weak ADP report and even more importantly a contraction seen in employment in the services sector, the largest US sector, according to the ISM Non-Manufacturing PMI.

Nevertheless, the taper train seems to be on track. Only a huge disaster can shift the Fed from tapering QE: the decision was communicated for a long time and Fed officials made it clear that it is on track. In addition, the bad weather is considered by everybody to be distorting the data. We will probably need to get data for the spring before we get clear weather and clear data.

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