Non Farm Payrolls Disappoint

Currencies Scramble Post Release

Traders were left scrambling following today’s US Non-Farm Payrolls release as the print of 103K jobs added fell well short of the consensus figure of 159K.  Always a big event, today’s NFP was given particular attention on the back of Wednesday’s ADP report that showed that the US economy added close to 300K jobs for the month of December.  This number led many to believe that there would have been a big surprise in the figure this morning, and as a result the USD has been well supported over the past few trading sessions.  After this morning’s release there were knee-jerk reactions in most major currencies, with the bias being to sell the USD and buy anything but the EUR.  The AUD, NZD and GBP have all rallied close to a full cent in the first half hour following the announcement and have fully recouped any losses seen over the past few days.  While the market was decidedly excited for this morning’s data, the disappointment on the miss can be tempered somewhat by the fact that it is still a fairly positive result for the US economy to add over 100K jobs in one month after all the bad press we have seen in the past number of months.  Today’s print represents the first time since last spring that we have seen three consecutive positive NDF figures, while the unemployment rate actually fell three ticks to 9.4%.  When put into perspective, the US economy is no longer bleeding jobs like it has been doing consistently since mid-2007, so while not a great result, today’s figure certainly cannot be considered too bad.  The economic backdrop in the US does feel as if it is improving slowly, and when comparing the US to Europe one could safely say that the prospects are brighter in North America and their respective currencies reflect this as well.
Eurozone Data Disappoints
A slew of data was released in Europe overnight with several high impact figures missing the mark and adding to the woes of the common currency, bringing the EUR to a fresh four-month low against the Greenback below 1.30.  First off the bat overnight were German retail sales, which fell a staggering 2.4% last month versus expectations of a 0.6% rise.  Then there was the German trade balance release that came in well under the consensus 14.5 billion with a print of 11.8 billion.  To top it all off industrial production was off close to a full percentage point for the month, adding fuel to the fire that is undermining the EUR.  German data is especially important for Europe as they are seen as one of the only remaining engines for growth in Europe and have to be relied upon heavily to support the debt-laden peripheral economies.  With Portugal being the new focus of the debt story and there still being no concrete plan from the EU, a weaker Germany will certainly not help the prospects of those countries seeking assistance.  Eurozone GDP came in under consensus, showing a rise of 0.3% for the previous quarter, with unemployment staying steady at 10.1%.  Following the NFP announcement the EUR tried to make a comeback but just did not have the resolve to make it back through the 1.30 level with any conviction.   Traders and investors alike are clearly shunning the EUR until they see signs of improvement, and today’s data certainly doesn’t give them anything to get excited about.
Loonie Continues to Outperform
The Canadian dollar was the big winner in currencies overnight, falling from around parity down to the 0.99 level on favourable Canadian employment figures.  Canada added 22K jobs for the month of December and the unemployment rate fell one notch to 7.6%, reaffirming the notion that what’s good for the US is good for Canada.  Even more encouraging about today’s release was the composition of the added jobs, with full-time jobs adding 38K positions and manufacturing putting on over 65K jobs.  Most of the losses came in the form of part-time positions and government jobs, showing that Canada is getting back to its old self.  Canada is, after all, still a manufacturing nation, even if a lot of international attention is paid to the resource sector.  The one troubling aspect here is that the current strong level of the Loonie does not lend itself well to the manufacturing sector, as our products become that much more expensive to the rest of the world.  With Canadian data showing some signs of life the prospects for a rate hike by the BoC have increased, but the current strength of the Loonie is helping to temper those expectations as inflation remains subdued.  The 0.99 cent level is looking like good support for USDCAD, having failed to break that level today on a few occasions.
Have a great weekend.