NFP Analysis: Only A Minor Bump In The Road For The Dollar

  • The US jobs report came out slightly below expectations.
  • However, it is good enough not only to justify a December increase but also further moves in 2019.

The US reported an increase of 155,000 jobs in November, significantly below expectations. Negative net revisions worth 12K were not helpful. Another downer was the slower wage growth in November: 0.2%.

However, salaries are still up 3.1% YoY, within expectations and at absolute levels, an upbeat figure. Moreover, the Unemployment rate remained at the historical low of 3.7% with a stable participation rate of 62.9%.

The US Dollar was initially knocked down but recovered quite quickly. Why?

Do not fade the Fed

The data missed market expectations but remains upbeat. The employment market is still expanding at a solid clip and wages are rising at a healthy pace. If somebody had doubts about a rate hike in December, these doubts were put to rest despite the miss.

The more substantial question is: what will the Fed do in 2019?

The Fed’s dot-plot from September points to three rate increases next year. Markets have long discounted these projections and price only around one hike in 2019 and potentially a cut in 2020.

These gloomy expectations are probably exaggerated. Not only does the economy look good and justify further hikes, but the Fed remains hawkish.

It is important to note that Fed Chair Jerome Powell was very pleased with the labor market in a speech on Thursday. It is probably safe to assume that the world’s most powerful central bank had prior knowledge of the jobs before delivering his speech.

So, even if some market participants see the NFP as disappointing, the Fed does not think so.

On this background, the US Dollar has room to rise from the post-NFP lows.


The US was expected to report an increase of around 200,000 positions in November, which is below the initial report for October that showed 250,000 jobs gained, but a healthy increase nonetheless. Average Hourly Earnings, or wages, carried expectations for 0.3% MoM and 3.1% YoY. Wage growth finally topped 3% in October. The Unemployment Rate was forecast to remain at the historic lows of 3.7%.

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