US Dollar Rallies After Strong NFP Employment Data
Employers in the US added more workers to payrolls than many analysts had forecast in October, according to the latest NFP (Non Farm Payrolls) data from the the Bureau of Labor Statistics (BLS). The unemployment rate was essentially unchanged at 7.9 percent. The report on Friday is the the last one prior to next Tuesday's General Election in the States, so this report holds additional weight from a political perspective.
Hiring for the month of October had increased by 171k workers following on from the 148k gain seen in September. There was a monthly revision to the upside for both September and August at +34k and +50k respectively. The increase in October came in ahead of the most bullish forecasts with a 125k gain widely cited before the report came out. When looking at the detail behind the headline figure we see that the Private Sector was shown to have brought in 184k additional jobs in October, with 51k Professional and Business Services positions, 31k Healthcare positions and 36k in the Retail sector.
Friday’s report represented the biggest gain seen since the August NFP report was released, when the US labor market had added 192k jobs.
The NFP can be one of the most volatile news events for financial markets. Stock markets were unable to sustain earlier upside momentum after the report, with the key S&P500 (Standard & Poor’s 500) Index erasing earlier gains after being up by around 0.5%, as America prepares for the General Election and weighs the extent of damage from Hurricane Sandy. The S&P500, which is seen as a global barometer for risk, had dropped to the 1,414.20 handle (0.9%) percent by the New York close on Friday.
In related markets, the greenback experienced broad based strength with the US dollar index trading above the recent range resistance highs and closing the week strongly. The US dollar to Japanese Yen rate printed a fresh 6-month high after the positive NFP report was released.
Higher than anticipated increase in Non-farm Payrolls (a figure above forecast estimates), and associated improvement in the jobs market, benefits the dollar as it helps remove expectations of additional Fed stimulus.