A slight NFP disappointment: +192K in March. The unemployment rate stayed at 6.7%. There are significant upwards revisions and the participation rate is actually higher at 63.2%. The US was expected to gain 200K non-farm jobs in March. The unemployment rate was predicted to slide back down to 6.6%. This is the first report for a month that didn’t encounter a winter storm, and expectations were probably even higher for a strong rebound in jobs.
Before the publication, the USD ticked higher: EUR/USD was around 1.37, GBP/USD around 1.6570, USD/JPY just under 104, USD/CAD at around 1.1020, AUD/USD under 0.9250, and NZD/USD above 0.8550. The dollar was initially sold on the headline but then rose on the details before falling again. Markets are trying to digest it.
 Data (updated)
- Non-Farm Payrolls: Â 192KÂ (February saw 175KÂ before revisions)
- Participation Rate: 63.2%Â (63% last month )
- Unemployment Rate:  6.7%, 6.6% expected (last month 6.7% before revisions)
- Revisions:Â +37K (+15K in January and 22K in February)(+25K in February)
- Private Sector NFP: +192KÂ (ADP showed a gain of +191K jobs).
- Real Unemployment Rate (U-6):Â 12.7%Â (previous: 12.6%).
- Employment to population ratio:Â 58.9%Â (previous: 58.8%)
- Average Hourly Earnings:Â 0%Â +0.2% expected, 0.4% in February.
- Average workweek: 34.5 (Last month: 34.2 hours).
Market reaction and Analysis
The initial reaction was a drop, but when the markets began reading the details, the dollar went positive. The shaking and moving continues.
Analysis:Â NFP reaction: buy the rumor, sell the fact; USD could come back
- EUR/USD jumped but then hit a new low of 1.3680. The Draghi drag still weighs.
- GBP/USD seems stronger, ranging between smaller and bigger gains, but not losing.
- USD/JPY suffered a big drop to 1.0355 but rebounded sharply.
- USD/CAD free fell below 1.10 to 1.0960, but that is thanks to the superb Canadian jobs report.
- NZD/USD continued showing resilience, rising as high as 0.8580.
- AUD/USD is higher, but still shy of the 0.93 double top. Will it become a triple top?
Background
Expectations have been high for this report, with the “whisper number†even reaching 250K. The main reason is the end of winter which caused both distortions and weaker hiring. In addition, ADP showed a gain of +191K jobs and included a good revision. More importantly, the employment component of the ISM Non-Manufacturing PMI rebounded very nicely. This is the biggest sector in the US.
While the Fed seems steady on course with the tapering program, the report has an impact on the speculation about the timing of a US rate hike in 2015.
Further reading: FX Outlook 2014 – Conditional Dollar Strength
