U.S. Nonfarm Payrolls for January were +353k, almost double the +185k estimate and the highest level in over a year. December’s NFP were revised higher to 333k, an added 117k from the initial +216k reported. January’s Unemployment Rate was unchanged vs. December at 3.7%, but below the 3.8% estimate.
Today’s Nonfarm payrolls marks the 3rd consecutive monthly gain since October’s drop to 150k (which now looks like a head fake in hindsight) and upends market expectations of any near-term Fed rate cuts. U.S. Treasury yields are sharply lower following the payrolls data and remain in flux as traders assess the rates landscape. It goes without saying that yields are lower in all tenors, the most damage in the mid-curve tenors with 1yr to 5y tenors -0.16% (16 basis points is a massive intraday move).
The dollar has followed yields higher with the U.S. Dollar Index now +0.68% and trading to as high as 103.86, its highest level since December 13th. Dollar gains have paused at 103.75, but momentum and a technical ‘outside day’ pattern formation (lower low and higher high in the same day) warrants expectation for additional dollar gains.
The dollar’s reaction to payrolls was swift and decisive as seen in the EUR/USD which gapped 40 pips lower. Current dollar gains vs. the G10/majors: +1.72% vs. NOK, +1.07% vs. SEK, +0.96% vs. NZD, +0.94% vs. JPY, +0.75% vs. CHF and AUD, +0.71% vs. GBP, EUR, and DKK, +0.54% vs. CAD, and +0.27% vs. MXN.
The probability of a May Fed cut has dropped to 67%, down from 96% yesterday.
Gold is -1.08%, silver is -2.64%, and oil prices are -2.18% to trade at $72.17/barrel.
