Non-Farm Payrolls 209K; wages +2.5% y/y – USD rises

Better than expected data in the US: 209K jobs were gained and wages are up 0.3%, as expected.The participation rate is up to 62.9%. Wages y/y are up 2.5% y/y. All in all, this is a good report.

The US dollar is stronger across the board, but after the initial rise, the greenback retreats from the very highs.

Update:  EUR/USD falls in the NFP aftermath – finally a meaningful correction – also related to tax talk

The US was expected to report a gain of 183K jobs in July after 222K in June (before revisions). Wages were expected to rise 0.3% after 0.2% and they remain key. See the preview:  Trading the NFP with EUR/USD – 3 scenarios for wages.

The US dollar remained on the back foot ahead of the publication

July 2017 NFP Data (updated)

• Non-Farm Payrolls:  209K  (exp. +183K  last 222K before revisions)
• Average Hourly Earnings +0.3% m/m, 2.5% y/y  (exp. +0.3% m/m, 2.5% y/y, last month 0.2% m/m, 2.5% y/y)
• Revisions: +2K – minor(+47K last time).
• Participation Rate: 62.9%  (62.8% last month )
• Unemployment Rate: 4.3%  (exp.4.3%,  last month 4.4%)
• Private Sector: 205K  (ADP showed 178K).
• Real Unemployment Rate (U-6): 8.6%  (previous: 8.6%).
• Employment to population ratio: 60.2%  (previous: 60%)
• Average  workweek: 34.5  (last month: 34.5).

A separate report showed that the US trade deficit remained very stable at 43.6 billion.

NFP Currency Reaction

• EUR/USD traded around 1.1880, ticking up within the high range. There are 5 reasons for the euro to rise. The pair reacts with a drop to 1.1825 before stabilizing.
• GBP/USD was trading around 1.3150, still reeling from the bearish BOE decision. Cable finds itself battling with 1.31.
• USD/JPY flirted with 110. The yen is taking advantage of the dollar’s troubles, most notably, the White House chaos. The pair bounces from 110 to 110.50.
• USD/CAD was around 1.2560. The Canadian dollar corrected some of its gains. It had a jobs report of its own. The pair temporarily topped 1.26. The Canadian jobs report was OK.
• AUD/USD was getting closer to 0.80 as the RBA failed to keep it low. The pair slips to 0.7950.

NFP Background

While the Fed is set to begin reducing its balance sheet in September, high uncertainty remains about the next Fed hike. Odds for December stand at around 50-50.

While the jobs market is growing nicely, wages remain stuck, and they are of high importance. Early indicators not that great: while ADP and the ISM Manufacturing PMI came out with solid numbers (as expected), the ISM Non-Manufacturing PMI badly disappointed. The services sector is large and a slide is the cause of worry.

More:  Don’t have pity for stubborn US dollar bulls