Job Numbers Don't Freak Out Dollar Bulls

Includes: ERO, FXF, GBB, JYN, UUP
by: Grace Cheng

US non-farm payrolls data was bad, quite bad, but not terribly bad. When the US economy is in such a bad state, it takes quite a lot to shock. Anyway here are the numbers: The US unemployment rate unexpectedly jumped to 6.1% in August from 5.7% in July, much more than the 5.8% expected by the market. That is the highest unemployment rate in five years. The jobs number also came in worse than many expected; 84,000 jobs were lost, versus the 71,000 expected. But hey, it’s not more than 100,000 is it? Back in June, employers got rid of a whopping 100,000 jobs, so 84,000 doesn’t have too much of a shock value. As for July, the job loss was revised upward from 51,000 to 60,000.

The economic recession and housing market slump has forced many companies to cut hiring and slash existing jobs so as to stay afloat. Jobs were lost across the board, ranging from automakers, factories, construction, retailers to professional and business services, except government, health and education sectors which saw some increase in employment. Somewhere there is a slight positive though: The construction industry only lost 8,000 jobs, compared with a 3-month average of 26,000 jobs lost. That’s an improvement.

Even though the US dollar immediately fell against other major currencies such as the Euro, Swiss franc and the British pound in forex trading (with the exception of yen), with the USD falling 130 pips against the Euro and 80 pips against the Swiss franc, the ultra-strong USD managed to erase almost or all of its initial knee-jerk losses within the 4 hours after the data.

What does that say about the dollar? Dollar bulls are still ruling the game, unwilling to give up their positions just because of a near-miss NFP.