Payroll growth favours taper, boosts dollar

The US dollar surged to a six-week high against the Japanese yen today, after non-farm payrolls grew faster than expected, tipping the scales of probability towards another reduction in stimulus at the next FOMC meeting.

The US Labor Department’s announcement today that 175,000 jobs were created last month, a result that comfortably exceeded the consensus estimate of 150,000.

There have been some quite reasonable fears over how much of a drag on the economy the recent bad weather in the US will prove to be, and this in turn led to some speculation that if we saw enough weakness, the Fed might consider holding off from another reduction in the pace of its asset purchases at the forthcoming FOMC meeting.

Today's bounce in payroll growth suggests the Fed’s outlook for the economy is unlikely to be changed for the long term though.

This is backed up by comments made yesterday and today by William Dudley, the President of the New York Fed and the vice-chairman of the FOMC. He said that he expects slower growth in the first quarter of this year on account of the weather, but his long-term forecast remains at around 3%.

As stimulus tends to debase a currency, expectations that the Fed will plough on reducing its QE programme has been supportive for the dollar. USD/JPY climbed 0.27% to 103.40 by mid-afternoon in New York, hitting its highest level since January.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.