NFPs Underwhelm

If Friday’s US data left you scratching your head, don’t worry; you’re not alone. Without even knowing the numbers from the release, one glance at the price action around the data (DXY, equities, bonds, we’re looking at you) would tell you that it was not a clear-cut release at all. On the headline NFP reading, expectations were sorely underwhelmed with a print of just 210k, well beneath the 553k the market was looking for and down sharply on the prior month’s 546k. Average hourly earnings were a bust also; the reading fell back to 0.3% from the prior and expected 0.4% reading.

Unemployment Rate Hits Pre-Pandemic Lows

Aside from those two glaring misses, there were some positives in the report, however. The unemployment rate was seen cratering lower to 4.2% from the prior month’s 4.6%, coming in well below the 4.5% expected. At this level, the US unemployment rate is now down to its lowest level since early 2020, before the pandemic took hold. Additionally, the labour participation rate was seen moving back up to 61.8%, back up to its highest level since early 2020 also.

Fed Implications

So, a mixed bag of data indeed. What does this mean for the Fed and what does this mean for the Dollar? While on the face of it, a big earnings miss like this might seem like reason enough to think that the Fed will maintain the current pace of tapering ( $15 billion per month). However, given the inflationary backdrop, there is pressure on the Fed. Additionally, while it is true that the NFP missed, given that jobs were still added (around the 200k) mark, and with the unemployment rate moving sharply lower, this likely gives the Fed enough room to increase the pace of tapering, if it so chooses.

CPI Up Next

The big focus now will be on the US CPI report due on Friday. This will be the key to gauging the Fed’s move at the upcoming December FOMC next week. If CPI comes in above forecasts once again, the Fed will all but certainly be stepping up the pace of tapering, sending USD firmly higher. On the other hand, if CPI comes in a little weaker then this will give the Fed scope to hold fire for now, maintaining tapering at $15 billion per month, sending USD a little lower near term.

Technical Views


The recent rally in DXY reversed just shy of a test of the 97.08 level, with price moving back into the bull channel. For now, 95.83 is holding as support. However, should the current bounce prove to be a lower high, any break below the 95.83 level will turn focus to a test of 94.63 next and the bull channel support. To the topside, a break above 97.08 will turn focus to 97.90 next.