Only 151k! Post NFP implications

05 February,, London – It would appear that one observation does not make a trend and Friday’s far below consensus (189k) Nonfarm Payroll figure doesn’t change the fact that they have been increasing at a solid pace out of late. The payrolls grew only 151k in January falling near the levels seen in October 2015, and almost twice as slow as the downwardly revised 262k release in December (previously 292K).

Data release

Looking at Friday’s news as a whole, the data was relatively mixed. Despite the downbeat NFP figures, the other details contained in the report were more positive than expected. Average hourly earnings m/m came in ahead of expectations at 0.5%, leaving the annual rate at 2.5%. Even though the rate is down from an upwardly revised 2.7% in the previous month, we still have a general up-trend in the figures since the middle of 2015.

Moreover, average hours worked per week increased from 34.5 hours to 34.6. Lastly, we witness the unemployment rate to continues edge lower, reaching March 2008 levels at 4.9%.

Post NFP implications

Today’s data appears to offer something for Fed doves and hawks alike. As a result, we could expect the market reaction to be somewhat mixed.

Meanwhile looking at GBPUSD, still having the EU Referendum in currency investors’ minds, we could expect the Cable to reach back down towards 1.435 as its firs targeted and then remain in the down-trend. Goldman Sachs has estimated should the UK vote to leave, in order to cover the current account deficit, GBP would depreciate by 15-20% falling to 1.15-1.12 in GBPUSD terms.

Further ahead, should February’s payroll’s report be released even lower, we could likely see the USD lose ground across the board as investors would price out the expectations of the one additional hike for 2016.

Consider reading: Barclays NFP technical setups

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