• The US economy has gained 49,000 jobs in January, below expectations.
• Dollar declines are a result of elevated expectations. 
• Prospects of robust growth – also due to stimulus – are set to boost the greenback.

“Buy the rumor, sell the fact\’ – that has been one of the consistent trading patterns through the decades and perhaps the centuries. January 2021’s Nonfarm Payrolls has proved no different.

The US gained only 49,000 jobs in January – within expectations seen on the economic calendar, but below the “whisper number.” The dollar is retreating in response, but it may be only temporary, especially EUR/USD’s rise toward 1.20.

First, apart from the headline number, the Average Workweek rose to 35 hours, better than expected. The Unemployment Rate fell to 6.3%, far better than expected. Moreover, the participation rate rose only by 0.1%, from 61.4% to 61.5%.

Secondly, there are other reasons to be cheerful. Hours before the NFP, the Senate took another step to pass a large stimulus bill by using the “reconciliation” process. Despite talks between the White House and moderate Republicans, Democrats seem keen on passing a partisan bill – which means one closer to $1.9 trillion presented by President Joe Biden. And that is dollar-positive.

Investors have been selling US bonds in response to upbeat figures and prospects of stimulus, making the US dollar more attractive. Prospects of stronger growth and expectations that the US government would need to issue more debt are underpinning this trend. Once the dust settles, this trend is set to extend.

The same could prove for stocks, which may also provide a “buy the dip” opportunity after several days of gains. Moreover, the Federal Reserve seems unmoved by the recent frenzy around “Reddit stocks” such as GameStop and AMC.