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Jobs Surprise!

This morning, US Non-Farm Payrolls came in much better than expected, showing a gain of 151K jobs vs. an expectation of a 60K and much, much better than last month’s loss of 41K.  The unemployment rate remains steady at 9.6%.  However, the Dollar is actually strengthening on this news, as the market may be wondering if we even need QE2, as the economy may be creating jobs despite the government.



Stock futures here in the US have flipped from negative to positive, and oil prices are higher.  This is helping the Loonie catch a bid this morning, as their unemployment rate ticked down to 7.9% from 8%, though the employment change figures were slightly less than expected.

In the EU, retail sales figures came in worse than expected, and German factory orders posted a loss for September vs. a slight expected gain.  In addition, bond spreads are higher for the countries trying to deal with deficit problems.

But the big news this morning is the NFP, which has induced some risk appetite.

In the forex market:

Aussie (AUD):   The Aussie is mostly higher as risk appetite has increased after Yen weakness stemming from Nikkei gains and the NFP number are driving demand.  In addition, the RBA’s monetary policy statement said that they will see faster growth and slower inflation due to the rise in the Aussie.

Kiwi (NZD):  The Kiwi is paring back losses against USD strength as the market attempts to decide whether or not the better than expected NFP number is positive for the markets or not.

Loonie (CAD):   The Loonie is higher and sits just 8 pips away from parity with USD.  While the number of jobs added came in less than expected, the unemployment rate ticked lower and oil is higher to .75.  (Click chart to enlarge)



Euro (EUR):   The Euro is lower across the board as German factory orders unexpected fell 4% vs. an expected gain of .4%.  In addition, retail sales figures in the Euro zone came in lower at -.2% vs. an expectation of a gain of .1%.  Greeks sending bombs to the ECB in “protest” aren’t helping matters much.  (Click chart to enlarge)



Pound (GBP):  The Pound is mixed this morning as PPI figures advanced at the slowest pace in nearly 8 months which could mean that the BOE will extend its accommodative monetary policy well into next year.  However, this does not equal an increase in the size of the easing, so Pound may continue higher if the Dollar remains weak.

Dollar (USD):   The Dollar started the morning showing strength as risk aversion from the European session sent markets lower.  However, the better than expected NFP number may be reversing that trend, though some in the market are wondering now if the announced QE2 may have been excessive.  Later this morning, pending home sales figures are due out.

Yen (JPY):   The Yen is weaker across the board as the Nikkei gained last night on the back of yesterday’s US stock market gains, completing the biggest weekly advance in nearly a year.  In addition, the BOJ maintained rates at 0-.1% and unveiled an easing plan that was much less aggressive than the US plan, but slightly stronger than policy pursued by the ECB.  (Click chart to enlarge)



Today’s Non-Farm Payrolls report is a much welcome relief to the dismal jobs reports we have been seeing as of late.  However, one number does not a trend make.  Hopefully, this is the start of a recovery that will hopefully put people back to work and get our economy moving again.

Expect the politics to heat up around this number, as both parties will claim victory as a result.  Now that the focus is back to the economy, the market is going to expect improvement right away.

With QE2 fresh on the minds of investors, many may be starting to wonder if it was even necessary or not.  China is publically asking for an explanation, in an effort to deflect attention from its own currency manipulations.

So there’s no turning back now, as the QE2 ship has sailed with a new crew aboard who are expected to work with the pilot (Obama) and navigator (Bernanke).  If they can agree to the proper course and work together to accomplish the common goal of getting the economy back on track, then all prior mis-steps may be forgotten.

However if there is a lack of cooperation, then that ship may just sink!  Let’s hope for the former and not the latter.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

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