hile there had been some speculation that US payrolls could rebound in October after a soft September, trading action since the announcement indicates that few were expecting this big a rebound.
What's particularly surprising is that a few minutes before the announcement, St. Louis Fed President Bullard, a known hawk had suggested that payrolls growth could slow in the coming months from 200K+ into the 100-125K range as the economy nears full employment.
Meanwhile, average hourly earnings came in above expectations, continuing a year-long trend of building inflation pressures.
The strong payroll increase and potential for higher inflation has reignited speculation that the FOMC could raise rates in December regardless of what the ECB does on stimulus. It also suggests that instead of one and done, the Fed may continue raising rates at a slow but steady pace through the year.
In reaction to the news, USD has taken off against pretty much everything, while gold in USD has been crushed, nosediving down under $1,100. Among paper currencies, GBP has taken the bigger hit as traders continue to react to the Bank of England’s surprise dovish turn yesterday. SEK and NZD are also down significantly with Riksbank comments and soft New Zealand employment suggesting their two central banks could still cut rates further. Currencies that have fallen the least include NOK and JPY where central banks recently declined to add stimulus.
Despite a strong Canadian jobs report, CAD has been unable to withstand the USD rally, but its declines have been in the middle of the pack. Should the USD strength relent at some point, CAD could bounce back.
US stocks have dropped back a bit on the news despite payrolls indicating a strong underlying US economy. It appears that coming through an earnings season where previous US gains continued to weigh on corporate earnings, traders could be concerned about what another USD upleg could mean for the earnings prospects of US multinationals.
Since the payroll report, Chicago Fed President Evans, the most dovish of this year’s voters who has called for rate liftoff to be delayed to 2016, relented and indicated December is a live meeting for a possible rate hike. Traders could look to comments later today from FOMC Governor Brainard for indications of whether any other doves have changed their tune due to today’s data.
Walt Disney $1.20 vs street $1.14
Nvidia $0.46 vs street $0.24
Significant announcements released overnight include:
US nonfarm payrolls 271K vs street 185K
US nonfarm payrolls revision 137K from 142K
US unemployment rate 5.0% as expected
US average hourly earnings 2.5% vs street 2.3%
Canada jobs change 44K vs street 10K
Canada full-time 9K vs previous (62K)
Canada part-time 35K vs previous 74K
Canada unemployment rate 7.0% vs street 7.1%
UK trade balance (£9.3B) vs street (£10.6B)
UK industrial production 1.1% vs street 1.3%
UK manufacturing production (0.6%) vs street (0.7%)
Germany industrial production 0.2% vs street 1.3%
Spain industrial output 3 8% vs street 2.8%
Norway industrial production 2.0% vs previous 3.1%
Upcoming significant announcements include:
3:00 pm GMT UK NIESR GDP estimate previous 0.5%
FOMC Bullard, Brainard and Tarullo speaking
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