What’s More Important Than Jobs in Today’s NFP?

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Market Drivers for May 2 2014

Aussie PPI bit hotter, EU PMIs as expected

UK Construction PMI at weakest level in 6 months but still above 60

Nikkei -0.19% Europe -1.15%

Oil $99/bbl

Gold $1284/oz.

Europe and Asia:

AUD PPI 0.9% vs. 0.6%

EU PMI 53.4 vs. 53.3

GBP UK PMI Construction 60.8 vs.62.2

EU Unemployment

North America:


USD Factory Orders 10:00 AM

Currencies were in their typical pre-NFP stall as traders awaited the marquee event of the week, although USD/JPY managed to trade through the 102.50 level as sentiment remained upbeat that US jobs report would show a snap back in economic activity.

The overnight economic calendar was generally muted with only a smattering of second tier data that did not have much impact on trade. In Australia the PPI readings printed hotter than forecast at 0.9% versus 0.6% eyed as rises in both exports and imports drove wholesale price levels higher. The Aussie however, barely budged in reaction to the news as the pair remains entrenched in the 9250-9300 range. With RBA expected to remain stationary for the foreseeable future, the Aussie is likely to trade off the moves in US interest markets for the time being.

In UK the Construction PMI printed at the weakest reading in 6 months but still managed to hold above 60 level. Although construction activity may have cooled somewhat, its is clearly just taking a pause as UK growth remains robust. Cable has consolidated under the 1.6900 level and remains well bid as markets continue to anticipate that BoE will be the first G-7 central bank to raise rates. Indeed if today’s US NFP report manages to beat expectations sterling could outperform its peers on the assumption that pick up in global growth will only encourage the BoE to act faster.

In Europe the final PMI readings came in at 53.4 versus 53.3 as Spanish data missed but was offset by upward revisions in French numbers. Unemployment rate was also revised lower to 11.8% from 11.9% initially forecast. The EUR/USD continues to tread water near the 1.3850 level as the 1.3900 figure remains a key resistance point for the pair. A miss in today’s US labor report could create a knee jerk spike above the 1.3900 handle but such a move would almost certainly produce a cacophony of jawboning from ECB members ahead of the May meeting next week and its an open question as to whether the pair could maintain those levels.

As to the NFPs themselves the maginot line for the market appears to be 200K, although some bullish forecasts have called for a 250K print or better. Anything above 200K should convince the market that the snap back from the winter doldrums is here and could provide a lift for the dollar, although the key metric that many traders will focus on will the average hourly earnings figure. With inflation remaining tame as measured by the PCE deflator, the Fed will be in no hurry to raise rates unless it see meaningful wage growth. That’s why in today’s report any pick up income may be just as important as growth in jobs if the dollar is to mount a sustainable rally.

Boris Schlossberg
Managing Director

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