USD flows: USD slightly softer after mixed employment report
Employment report mixed despite stronger than expected rise in payrolls. Mild USD negative reaction seems unlikely to persist
A mixed employment report, with September non-farm payrolls rising more than expected at 119k, but July and August were both revised down so the net miss relative to consensus was only +36k. Also, the unemployment rate rose to 4.4% against market expectations that it would remain steady at 4.3%, and average earnings growth was weaker than expected at 0.2%, although August was revised up to 0.4%. All in all, net quite neutral, but there has been a mild negative USD reaction after an initial USD rise, with US front end yields edging a little lower. We don’t really see the case for this, as the Fed seems unlikely to be cutting rates against this background given the recent more hawkish comments. There will be no October employment report and the November report won’t be available until after the December 10 FOMC, so there won’t be any weak employment data between now and the FOMC. The speculative market was no doubt somewhat long USD into the data, and that may account for the mild USD decline, but the general USD tone should remain firm other things equal.