It is quite uncommon to see the US dollar rising across the board on a significantly worse than expected Non-Farm Payrolls. Jobs advanced by 151K, worse than 190K expected and well below the average of recent months.

The dollar initially dropped, with EUR/USD reaching 1.1244, USD/JPY continuing its reversal of the BOJ move and other currencies following suit. Yet this did not last too long.

The market focus moved quickly to the inflation related figure: wages. The Fed is happy with jobs and putting its focus on inflation, as we’ve heard in the two recent rate statements. So, the emphasis of the Fed is read by markets. Average hourly earnings rose by 0.5% m/m and 2.5% y/y, better than expected.

So is this the reason behind the dollar advance?

It’s hard to say. The US dollar suffered badly earlier in the week, crashing after the poor services report with big breakouts across the board. And the jobs report is on Friday: the best time for profit taking, closure of positions and reversals in general.

To add another layer of complication, it wasn’t only the wages that beat expectations but also the unemployment rate: it dropped under the psychological level of 5% to 4.9% – edging another step towards the not-so-clearly defined “full employment” level. This was accompanied by a rise in the participation rate to 62.7% and also the wider employment-to-population ratio continued ticking up to 59.6%.

If this is only profit taking, we should see a resumption of the dollar sell-off on Monday. If wages are ever-powerful, Yellen will comment on that on Wednesday.

Here is the fall of EUR/USD following the release of the US jobs report:

 

 

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