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Is US Job Growth Still Under the Weather?

For the past 6 months or so now we have traded a 1.3400 to 1.3800 range in EURUSD. That was up until yesterday when the Euro surged higher against the US dollar as the ECB somewhat surprised some market participants by holding interest rates steady. This was followed up by a relatively up beat press conference. EURUSD moved from 1.3740 to 1.3870 in subsequent trading and now that we have broken this range the question we have to ask; is this set to continue?

Well, this afternoon should provide further guidance at 1.30pm as we will discover whether February’s non-farm payrolls data will “Spring Forward” or produce another month of bleak below par US job growth. With January’s data missing expectations on the back of severe weather in the US, the market will nervously await today’s number given the snowfall they have experienced throughout February.

With Wednesday’s release of the latest ADP and ISM non manufacturing surveys for February both disappointing. The likelihood of a Non farm payrolls number below the consensus and the prospect of a weaker USD this afternoon looks possible.

Market Consensus

The market consensus for the number today is 149,000 jobs and a number below this will likely see a test of the 27th December’s 2013 trend high at 1.3893 at risk and potentially 1.4000 on the cards as a near term target.

Since the last unemployment reading the Fed decided to maintain the current rate of reduction of asset purchases despite the tensions we witnessed in the emerging markets. However this was probably helped by the fact that the unemployment rate fell and the labour force participation increased in January.

For me, if we were to see another disappointing number today for US job growth, life post the unemployment data might not be so straight forward for the Fed and the US dollar in the coming weeks.

The risk to this would be if we get a number above the consensus 149,000. This on top of a falling unemployment rate and increase in the participation rate as we saw in January would probably see the market reassess it view on the US dollar in the short term. Nevertheless EURUSD moved from 1.3580 to 1.3630 on the back of January’s disappointing unemployment data and for me I think this month’s data will ultimately paint a similar picture with disappointing job growth but a falling unemployment rate. As for EURUSD the trend is higher and yesterday break feels significant and makes December 2013 level vulnerable. So keep a close eye on the FX markets at 1.30pm today!



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