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I published this report on FX360.com this morning (if you haven’t read it already)
The U.S. dollar skyrocketed after the stronger than expected non-farm payrolls report. Not only did the headline number surprise to the upside, but private sector job growth beat expectations with the July figures also revised sharply higher. This positive non-farm payrolls number will bring relief to both the currency and equity traders and suggests that September may actually be a good month for the financial markets. Given the global impact of the U.S. recovery, everyone around the world will be cheering this report.
Non-farm payrolls fell by only 54k in August, compared to the forecast for 105k job losses. The July figure was revised higher from -131k to -54k. Private sector payrolls rose 67k against a 40k forecast with the July number revised up from 71k to 107k. Excluding Census workers, August payrolls increased by 60k. Cutbacks forced government workers to slash 121k jobs last month but U.S. corporations picked up the slack. The only black mark in the report was the unemployment rate which rose from 9.5 to 9.6 percent.
Although this was the third consecutive month that more jobs lost than acquired, this is the best outcome that investors could have hoped for. The stronger non-farm payrolls report will reduce the pressure on the Federal Reserve to implement additional Quantitative Easing and practically guarantees that the central bank will make no new announcements on Sept 21st. Central bank officials will be able to enjoy the Labor Day holiday with a lighter heart knowing that the labor market is moving in the right direction.
It is no secret that U.S. corporations are flush with cash and the non-farm payrolls report suggests that they are beginning to spend their money by increasing their workforce. The sustainability of the improvement is important but the August number along with the July revision already indicates that job losses in the third quarter was not as bad as previously feared.
As long as the non-manufacturing ISM report at 10am NY Time is not horrendous, we expect the U.S. dollar to hold onto its gains against the Japanese Yen and the EUR/USD and GBP/USD to remain firm as long as equities trade higher during the North American session.