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NFPs Beat Soundly But FX Reaction Muted

Last updated 1/6/2012 9:11 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

The eagerly awaited US Non-Farm payrolls report solidly beat expectations printing  at 200K versus 150K eyed as the American labor market expanded for  15th month in a row. The unemployment rate was also lower to 8.5% from 8.7% the month prior. The data was positive across the board with average hourly earnings rising by 0.2% as expected and average hours worked increasing to 34.4 from 34.3 forecast.

This was the sixth consecutive month of triple digit gains in jobs and the second monthly reading or 200K gains or more. The news from the labor front clearly suggests that the US economy is beginning to improve as overall demand picks up and also points to the fact that North America is likely to outperform Europe in the first half of the year.

That dollar rallied against all of its major counterparts as better US economic data, trumped positive risk flows. The EUR/USD fell to anew 16 month low of 1.2725 in the aftermath of the news  and may trip the 1.2700 level as the day proceeds.  The pair has essentially decoupled from risk appetite flows and given the clear out performance of the US economy and the possibility of further rate cuts in the EZ, the EUR/USD may now begin to trade in sync with US economic data going forward.

Overall however, despite the better than expected NFP results the reaction in the currency markets has been muted so far. With investors still cautious about the problems surrounding EZ debt and the region’s economy appetite for equities appears to be tepid and currencies may remain relatively contained for the rest of the day.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.