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Payrolls Report Bullish for Dollar and US Economy

Last updated 9/3/2010 8:50 AM ET (GMT -5) 9 Comments

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Kathy Lien

Director of Currency Research, GFT

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.

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Comments (9)

Semaj

September 03, 2010 at 09:09 AM ET

K, for your scenario 2 from yesterday's report, is that for the usd/jpy dollar strength or should it be broad usd strength.?Thanks

Stephan Smith

September 03, 2010 at 10:16 AM ET

Scenario 2 is the winner! It's weird though, for the AUD/USD is in a rally right now. Why do you think that is happening?

MHW

September 03, 2010 at 11:18 AM ET

SS: Because U.S. stocks are rallying (or were earlier in the morning). Right or wrong,
AUD/USD is precisely hitched to U.S. stocks during the New York trading session.

Stephan Smith

September 03, 2010 at 11:33 AM ET

Ah, I didn't know that. I will keep that in mind and test the validity of what you say in the coming months by keeping a closer eye on the US equity markets during the New Your trading session.

MHW

September 03, 2010 at 11:53 AM ET

SS: I'm not talking about "in the coming months." I'm talking about now. The Aussie might
be more hitched to something else later.

For now, compare the real-time movement of the Dow with the real-time movement of the Aussie:

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=indu&time=&freq=

Semaj

September 03, 2010 at 10:57 AM ET

Thats where I was fishing. It seems the commodity currencies are benefitting from risk appetite on the good news.

I think all the worthless chat on this site has not been encouraging replys from some commentators like there once was. There seem to be plenty of good questions lately that go without replys unless the reply is not warented if the answer lies in the current or past articles that we are not digesting.

Everyone makes their own decisions in trading but a site like this can be a big help on things that are cloudy to a viewer, fundamentally speaking. No disrespect intended !

Stephan Smith

September 03, 2010 at 11:28 AM ET

Well said.

Mohd Hikmat

September 03, 2010 at 05:39 PM ET

on the good news of US data as mentioned why in forex the USD was declined & the commodity raise

simple

September 05, 2010 at 04:30 PM ET

im sorry where did u see "skyrocketed" .. i see the eurusd now at 1.29

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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.