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An excellent Non-Farm Payrolls report: a gain of 280K jobs with positive revisions of 32K. The unemployment rate is up to 5.5% on a rise in the participation rate to 62.9% and a rise in the employment to population ratio, something that is not so common. Wages are up +0.3% and 2.3% y/y – breaking out of range – all good.

USD is higher across the board – more coming

Expectations stood on a gain of 225K jobs in May after 223K in April (before revisions). The unemployment rate  was predicted to remain unchanged at 5.4%. Average hourly earning carried expectations for a rise of +0.2% m/m.

Here is how to trade the NFP with EUR/USD.  Tension characterized the markets before the publication of this all important event.

Data (updated)

  • Non-Farm Payrolls:  280K  (exp. +225K,previously 223K  before revisions)
  • Participation Rate: 62.9%  (62.8% last month )
  • Unemployment Rate: 5.5%(exp.5.4%,  last month 5.4% before revisions)
  • Revisions: +32K  March is now 119K instead of 85K and April is 221K instead of 223K.    .(-39K last month)
  • Average Hourly Earnings: +0.3%, 2.3% y/y  (exp. +0.2% m/m, last month +0.1% m/m, 2.2% y/y)
  • Private Sector: 262K  (ADP showed a gain of +201K jobs, but with a big positive revision).
  • Real Unemployment Rate (U-6): 10.8%  (previous: 10.8%).
  • Employment to population ratio: 59.4%  (previous: 59.3%)
  • Average  workweek: 34.5  (last month: 34.5).

Analysis and currency reaction (updated)

Analysis:  3 reasons to go long USD on the NFP

  • EUR/USD traded around 1.1220, down from the highs on an escalation in the Greek crisis. The pair is free falling to 1.1080, nearly erasing all the week’s gains.
  • GBP/USD was around 1.5320, down from the highs. It is at 1.5240 after the release.
  • USD/JPY traded around 124.75. The pair usually provides the most relevant reaction. Dollar/yen is at a new 8 year high of 125.60.
  • USD/CAD  hugged the round 1.25 level. Note that employment data is also released in Canada at the same time. Canada also enjoyed a good report, so USD/CAD is little changed at 1.2470.
  • AUD/USD was around 0.7710 after a busy week.  The Aussie is down to 0.7635.
  • NZD/USD traded around 0.7135, close to the 5 year lows. is at a new 5 year low at 0.7050. Will it break below 0.70?

Analysis – it’s all good:  3 positive takes on the NFP and 3 reasons NOT to hike in June

Background

Data towards the release was mixed: the ISM Non-Manufacturing PMI disappointed but remained on high ground. The manufacturing sector saw a better read while ADP came bang on expectations. So, there was no divergence from the initial expectations for 225K.

This is the last NFP before the all important rate decision in June. An amazing report is needed for a rate hike, which will probably come in September according to our analysis. A bad report could firm market expectations for a December move.

More:  6 Reasons To Fade EUR/USD Strength – BNPP

In this week’s podcast, we explain why EUR rallied on Draghi, what’s next, discuss oil and gas, run through the Plus500 story and preview next week’s events.

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