Non-Farm Payrolls: Good for the Economy, Bad for the Dollar

Last updated 5/8/2009 8:50 AM ET (GMT -5) 4 Comments

Forex Trading involves high risks, with the potential for substantial losses and is not suitable for all persons. Past performance is not necessarily indicative of future results.

Kathy Lien

Director of Currency Research, GFT

The better than expected non-farm payrolls report has driven the U.S. dollar lower across the board. For the sixteenth consecutive month, the U.S. economy has reported negative job growth. Since risk appetite is the dominating theme in the currency market these days, the good number has prompted investors to sell the U.S. dollar and move into riskier, higher yielding currencies.

In April, 539k Americans lost their jobs, driving the unemployment rate to a 25 year high of 8.9 percent, levels last seen during the double dip recession days of 1983. Even though the March figures were revised down to -699k from -663k,the improvement in April suggests that the labor market is bottoming. The better than expected number is not too much of a surprise given the decline in jobless claims, smaller layoffs and the improvement in the employment component of service sector ISM. In our Non-Farm Payrolls Preview , we said that there is a good chance payrolls will fall by -550k. 

Despite the better than expected number however, we need to respect the seriousness of more than half a million job losses. If you extract out the 72k increase in government jobs, the non-farm payrolls number would also be much worse. Therefore the labor market is still in crisis mode but the fears are easing. Nonetheless, the bottom in the labor market is near and we believe that this will help keep the dollar under pressure in the coming week. With many of uncertainties out of the way the EUR/USD should be headed to 1.36. The better than expected number is good for the economy, but bad for the U.S. dollar. 

 Employment Instant Read

Comments (4)

chandra

May 08, 2009 at 10:24 AM ET

plz add daily report in gold silver crudeoil with chartt technical's..........
thanku

klien

May 08, 2009 at 02:14 PM ET

Thanks for the comment. Our focus is currencies, so we don't cover technicals on the commodities but you can get the oil and gold charts from our Quoteboard

David

May 10, 2009 at 03:59 AM ET

"the good number has prompted investors to sell the U.S. dollar and move into riskier, higher yielding currencies."

Why? I thought strong economy will appreciate it own currency.

klien

May 10, 2009 at 09:56 PM ET

Generally speaking that is true, but in the past 6 months or so, risk appetite is driving the dollar and not economic data. Reason being many people parked their money into the safety of dollars as the crisis hit and now good data is giving them the confidence to take that money out of dollars and invest elsewhere.

Add Your Comment

Please login to post a comment or sign up for an FX360® account.

Loading...

About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.