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US Unemployment Rate Falls to 8.6% – this is a big positive surprise. Non-Farm Payrolls showed a gain of +120K as expected before the publication, but worse than rumors suggested.

EUR/USD rose to the higher end of the 1.3420 – 1.3550 range upon the release, and was unable to break higher, at least for now. After failing to break higher, the pair is falling. Other “risk currencies” are falling as well. It seems that this is a “buy the rumor, sell the fact” behavior.

The data:

  • A total of 120K jobs were added.
  • 140K jobs were added in the private sector. Yet again, the government weighed down on the report.
  • September and October saw 72K more jobs than initially reported.
  • Unemployment rate fell from 9% to 8.6%. BUT:
  • The participation rate from from 64.2% to 64%.
  • The US job force squeezed by 315K.
  • The “Real Unemployment Rate”, U-6 dropped from 16.2% to 15.6%. This is significant, but still remains high.
  • Average Hourly Earning dropped by 0.1% to $23.18.

Early expectations stood on a rise of 120K, yet rumors towards the release spoke about a gain of over 200K. October’s figure was revised from +80K to +100K. The total of revisions added 72K. As mentioned in the NFP preview, revisions above 100K would have been meaningful enough.

The unemployment rate was expected to remain unchanged at 9%. The figure of 8.6% is the lowest since March 2009, but it comes on top of a drop of 315K workers out of the workforce – this isn’t too good. In addition, the participation rate fell from 64.2% to 64%.

The current environment is a “risk environment”, whereas positive US figures weaken the dollar on hopes for global growth, and bad US figures strengthen the greenback on safe haven flows.

Sine the announcement about cutting US dollar swap rates, EUR/USD has traded in last week’s 1.3420 to 1.3550 range. It is now sliding under 1.35, and still has a way to go.

Once the dust settles from the NFP, the focus will return to the debt crisis and tensions will rise towards the upcoming EU Summit on December 9th. For more on the euro, see the EUR/USD forecast.

QE3 very far

The chances of a third quantitative easing program are lower once again. While the gain in jobs isn’t strong nor impressing, the US still enjoys a steady rise in jobs.

The situation in Europe could still deteriorate and impact the US job market, but this is still to be seen.