Non-Farm Payrolls slightly miss with 156K – USD rises

The US economy gained 156K jobs in September, slightly lower than 171K expected but probably over the low bar needed for a  December hike. The unemployment rate is up to 5%, also slightly worse than predicted but on top of a rise in the participation rate to 62.9%. Wages are OK with 0.2% m/m, 2.6% y/y as expected. The details of the report are mostly positive.

The  USD is initially lower. Will it eventually emerge as a winner?

Analysis:

• Sep NFP: The Trend Still Solid; Fed To Hike In December – BofA Merrill
• Sep NFP: Not The ‘Smoking Gun’ For A Dec Hike; We Still See The Fed On Hold This Year – Danske

The US was expected to report a gain of 170K jobs in September. Wages  were predicted to advance 0.2% m/m and 2.6% y/y. Preview: trading the NFP with EUR/USD.

The US dollar was looking good ahead of the publication, especially against the collapsing British pound.

September NFP Data

• Non-Farm Payrolls:  156K    (exp. +170K, last 151K before revisions)
• Average Hourly Earnings 0.2% m/m, 2.6% y/y  (exp. +0.2% m/m, last month +0.1% m/m, 2.4% y/y)
• Revisions: -7K in total  August revised up to 167K, July to 252K  .(-1K last time)
• Participation Rate: 62.9%    (62.8% last month )
• Unemployment Rate: 5%  (exp.4.9%,  last month 4.9% before revisions)
• Private Sector: 136K  (ADP showed 154).
• Real Unemployment Rate (U-6): 9,7%  (previous: 9.7%).
• Employment to population ratio: 59.8%  (previous: 59.7%)
• Average  workweek: 34.4  (last month: 34.3).

NFP Currency Reaction

• EUR/USD traded around 1.1140, suffering some collateral damage from the weakness of the pound and  ignoring the “taper-talk“. Reaction: a rise to 1.1170 only results in a fall to lower ground at 1.1130.
• GBP/USD was around 1.2350, still trying to  stabilize after the huge flash crash. A recovery attempt fails.
• USD/JPY traded around 103.60. On one hand, USD strength supports the pair. On the other hand, JPY is a safe haven currency.  USD/JPY ticks higher to 103.70.
• USD/CAD traded around 1.3270, unable to capitalize on the rise in oil prices following the OPEC agreement. Dollar/CAD is lower at 1.3210 thanks to a superb Canadian jobs report.
• AUD/USD traded around 0.7580, succumbing the greenback’s advance. The pair erases the initial rise.
• NZD/USD was around 0.7140, extending its falls. Currently holds its ground.

NFP Background

After the latest rate decision, the bar for raising rates is lower. A smaller gain of 150K and continued OK wage growth will  probably be enough for raising the rates in December, assuming a Clinton victory over Trump. The US dollar enjoyed strong momentum coming into the event. The GBP flash crash stole part of the show.