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4 Feb 2013
Forex Flash: Jobs talk will dampen talk of US recession – BBH
Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman notes that the January nonfarm payrolls 157k increase was in line with expectations, but the back month revisions were worth another 127k and average hourly earnings rose 0.2%, a bit more than expected.
He feels that the risk in the unemployment rate climb to 7.9% from 7.8% reflects two things – the participation rate and the incorporation of new census data. Chandler adds that the revisions mean that the economy created a new 196k jobs in December and 247k in November and that the Fiscal Cliff clearly did not restrain hiring. He comments, “Some Fed officials have suggested job growth needs to be closer to 200k a month and sustained before they feel comfortable with a turn in the labor market. There are no significant policy implications.” Further, the FOMC just renewed its commitment to open throttle monetary policy with a $85 bln a month in long-term asset purchases.
Chandler feels that the forces that are driving the fx market are: the passive tightening of Euro area monetary conditions, some evidence that the regional economy is recovering, weak Japanese data and the Abe government commitment to aggressive monetary and fiscal stimulus are unaltered by the US employment data. He feels that this means that the Euro is likely headed higher and around 1.3700, will see short term operators looking for 1.3800-4000. Elsewhere, he sees that the dollar slipped against the Yen, but he is looking for USD/JPY to hold around 91.60-80.
he finishes by noting that after the shockingly weak Q4 US GDP, there was some fear that with the end of the payroll savings tax holiday, the US may may have slipped in to recession (defined as 2 quarters of contraction). However, he writes, “we cautioned then, and reiterate in light of the employment data, that this is unlikely.”
He feels that the risk in the unemployment rate climb to 7.9% from 7.8% reflects two things – the participation rate and the incorporation of new census data. Chandler adds that the revisions mean that the economy created a new 196k jobs in December and 247k in November and that the Fiscal Cliff clearly did not restrain hiring. He comments, “Some Fed officials have suggested job growth needs to be closer to 200k a month and sustained before they feel comfortable with a turn in the labor market. There are no significant policy implications.” Further, the FOMC just renewed its commitment to open throttle monetary policy with a $85 bln a month in long-term asset purchases.
Chandler feels that the forces that are driving the fx market are: the passive tightening of Euro area monetary conditions, some evidence that the regional economy is recovering, weak Japanese data and the Abe government commitment to aggressive monetary and fiscal stimulus are unaltered by the US employment data. He feels that this means that the Euro is likely headed higher and around 1.3700, will see short term operators looking for 1.3800-4000. Elsewhere, he sees that the dollar slipped against the Yen, but he is looking for USD/JPY to hold around 91.60-80.
he finishes by noting that after the shockingly weak Q4 US GDP, there was some fear that with the end of the payroll savings tax holiday, the US may may have slipped in to recession (defined as 2 quarters of contraction). However, he writes, “we cautioned then, and reiterate in light of the employment data, that this is unlikely.”