Total US nonfarm payroll employment rose by 126,000 in February and the unemployment rate remained at 5.5%. Job gains continued in professional and business services, health care, and in retail trade. Revisions from the previous months where January was revised down from +239,000 to +201,000 and the change for February was revised from +295,000 to +264,000. With these revisions, employment gains in January and February were 69,000 lower than previously reported. This takes the 3-month average gains to just 197,000 per month, from 288,000 previously and ends the 12-month streak of job gains above 200,000 for the month.
It is hardly surprising the moves of late in the currency markets in the run up to the Fed announcement, and at the conclusion of their two-day meeting. With short-dated gamma (rate of change of your delta exposure) at a premium, the pull back of the dollar post Fed removal of the word patient from their statement was severe, with a 4% move higher in EUR/USD. The market moved to where the most pain was centered, which were stop/loss orders higher up, in a market where almost everyone is short. So, during the NY afternoon when liquidity is not great, a lot of those who were short EUR/USD got stopped out of their positions, and a lot of people who sold into this rally were also stopped out. It was arguably a tough day for most spot dealers who have a decent order book and just about anyone else with a Euro position.
The headline number is that total nonfarm payroll employment rose by 295,000 in February and the unemployment rate nudged down to 5.5% from 5.7% previously. Job gains occurred in food services and drinking places, professional and business services, construction, health care, and in transportation and warehousing. Added to this are revisions from the previous months where December remained at +329,000 and the change for January was revised from +257,000 to +239,000. With these revisions, employment gains in December and January were 18,000 lower than previously reported. This takes the 3-month average gains to 288,000 per month.
We all know from The Economist long ago that currencies is a ‘mugs game’ but just for fun I will offer out my predictions for certain currency pairs on 31st December 2015. We used to do this at year-end on the trading desk to kill time but rarely was the keeper of the predictions able to find them the following year or, worse, he was no longer with the bank. In that instance, our previous years predictions were invariably lost to the HR department’s desk contents file. Incidentally, today’s desk contents file is managed by the compliance department, as is most everything at banks these days. Since I am starting out this year I have none to review from last year so lets make some predictions just for kicks and not wager a dime on them.
31st December 2015
The US dollar will outperform in 2015 due to anticipated interest rate rises by the FED, improved wages/consumer spending and the general poor economies of Europe and Japan and those countries reliant on the price of oil. I believe these macro themes will dominate a majority of the year and provide the FX market the much needed trend that fund managers and sell-side traders so desperately need to justify expensive remuneration for services that are increasingly being performed by algorithms.
Wishing everyone a very happy, healthy and prosperous 2015!