Comprehensive Miss In Non-Farm Payroll Data Sends Dollar Plummeting

Dollar falls steeply in early US session following a disappointing non-farm payroll report that fell short of market expectations across key metrics including job growth, unemployment rate, and wage growth. DOW futures surge over 500 pts at the same time while 10-year yield dives through 4.5% mark.

Despite the single month’s data being insufficient for defining a trend, the NFP report has injected a fresh dose of optimism into the market, raising hopes that Fed might be more ready to start cutting interest rates this year. Currently, fed fund futures reflect a growing consensus among investors, with the probability of a rate cut in September rising to over 62%, up from 58% just a week earlier.

As for the week, Dollar is trading as the worst performer, and is highly likely to end the week in this position. Canadian Dollar is the second worst by a distant, followed by Sterling. Yen remains the strongest one, followed by Swiss Franc, and then Kiwi. Euro and Aussie are positioning in the middle.

In Europe, at the time of writing, FTSE is up 0.46%. DAX is up 0.44%. CAC is up 0.51%. UK 10-year yield is down -0.095 at 4.196. Germany 10-year yield is down -0.066 at 2.478. Earlier in Asia, Nikkei fell -0.10%. Hong Kong HSI rose 1.48%. China was on holiday. Singapore Strait Times fell -0.12%. Japan 10-year JGB yield rose 0.0101 to 0.906.

US NFP grows only 175k, unemployment rate rises to 3.9%

US Non-Farm Payroll employment grew 175k in April, well below expectation of 243k. It’s also way lower than the average gain of 242k in the prior 12 months.

Unemployment rate rose from 3.8% to 3.9%, above expectation of 3.8%. Labor force participation rate was unchanged at 62.7%.

Average hourly earnings rose 0.2% mom, 3.9% yoy, below expectation of 0.3% mom, 4.0% yoy.

Eurozone unemployment rate unchanged at 6.5%, EU dips to 6.0%

Eurozone unemployment rate was unchanged at 6.5% in March, matched expectations. EU unemployment rate fell from 6.1% to 6.0%.

Eurostat estimates that 13.258m persons in the EU, of whom 11.087m in the euro area, were unemployed in March 2024.

UK PMI services finalized at 55, indicating 0.4% quarterly GDP growth

UK PMI Services was finalized at 55.0 in April, marking a significant improvement from March’s 53.1 and representing the highest level since May 2023. This level of activity, the highest since May 2023, signals robust growth in the sector, with activity and new work rising at the fastest rates in 11 months. Despite these positive developments, input cost inflation remains high, reaching its peak since August 2023, though the rate of staff hiring continues to be subdued.

Tim Moore, Economics Director at S&P Global Market Intelligence, highlighted that the latest survey results suggest the UK economy is growing at a quarterly rate of 0.4%. He noted, “Prices charged inflation across the service sector eased to a three-year low in April, suggesting that the pass-through of higher costs has started to wane.” This slowdown in price increases comes despite a sharp rise in business expenses driven by strong wage inflation, which continues to push up operating costs.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9079; (P) 0.9126; (R1) 0.9155; More….

USD/CHF’s sharp fall and strong break of 0.9087 support confirms short term topping at 0.9223, after first rejection from 0.9243 key resistance. Intraday bias is back on the downside, and deeper fall would be seen to 38.2% retracement of 0.8332 to 0.9223 at 0.8883. On the upside, above 0.9087 will now turn intraday bias again first.

In the bigger picture, price actions from 0.8332 medium term bottom are tentatively seen as developing into a corrective pattern to the down trend from 1.0146 (2022 high). Rejection by 0.9243 resistance, followed by sustained break of 38.2% retracement of 0.8332 to 0.9223 at 0.8883 will strengthen this case, and maintain near term bearishness. However, decisive break of 0.9243 will argue that the trend has already reversed and turn medium term outlook bullish for 1.0146.

Economic Indicators Update