Summary: The latest nonfarm payrolls release out of the US features a stunning headline figure and some more troubling data on the unemployment front. The result has been a notable lack of the dollar rally such a print would ordinarily spark.
The US added another 304,000 jobs in December, trouncing forecasts of a 165,000 gain. The results were muddled, however, by an increase in the unemployment rate to 4.0% from 3.9%. The Bureau of Labor Statistics said the government shutdown contributed to the uptick in those measures. However, it was the weak increase in average hourly earnings – a mere 0.1%, well below December's 0.4% rise – that took the bloom off the rose.
Typically, an NFP print of 304,000 would have sparked a sharp US dollar rally, but that didn’t happen. The US dollar lost a bit of ground against the CAD and GBP while positing minor increases versus JPY and CHF. EUR, AUD and NZD remained flat as of 14:00 GMT.
The Fed expects US employment to stay strong, making the job gains a secondary consideration. It ismore concerned about the stubbornly low rate of inflation. The lack of wage inflation, evident in the average hourly earnings component, validates the Fed’s decision to hit the pause button on rates. The greenback recovered a bit after Michigan Consumer Sentiment, and ISM Manufacturing PMI were higher than forecast.
USDCAD continues to chew through layers of support. It took out the 200-day moving average at 1.3225, and the 61.8% Fibonacci retracement level of the October to January range at 1.3115. A break below support of 1.3050 would lead to a test of uptrend support at 1.2990. Firm oil prices, a dovish Fed and expectations for a rebound in GDP growth in December are pressuring the downside.
Wall Street opened a tad shaky. Traders aren’t sure if they should be selling because of Amazon (AMNZ: Nasdaq) predicted slowing growth after announcing record sales over the holidays or if they should be buying because the Fed refilled the easy-money punch bowl. Amazon concerns may win the day. The stock is down 4.20% as of 14:00 GMT, and that may encourage traders to lock in some gains earned this week.