USD Dives on Weak Payrolls, GBP Up on Election, AUD Up


Rates as of 0500 GMT

Market Recap

Fridays US nonfarm payrolls report was deeply disappointing. Not only were far fewer jobs created than expected, but also the March figure was revised down, and the unemployment rate rose.

Payrolls are still far below their prepandemic level. To make matters worse, before the pandemic they were growing by close to 200k a month, so in fact if they had continued on trend, there would have been some 154.7mn payroll jobs in April, not the 144.3mn that there actually were. In other, words there are 10.4mn missing jobs, not 8.2mn the difference between February 2020 and April 2021.

At the current trend, we wont get back to last Februarys level until July of next year, and wont get to where the previous trend was headed until October 2023.

Unless theres a big change in the trend, its going to be end2023 before we reach anything near maximum employment. The Committees forecast that the fed funds rate is likely to remain unchanged until end2023 doesnt look so unreasonable any more.

Of course, as the Biden Administrations spending plans get translated into action and real jobs, the pace of hiring is likely to pick up. But the FOMC no longer makes decisions based on its forecasts, only on actual data, so it will have to see the figures before moving. As a result, fed funds expectations were scaled back and the dollar weakened.

If we look at the last six times the NFP missed estimates, we see that generally speaking, EURUSD trended higher…


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