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It seems that the markets are, like we suggested, focusing on the Fed more than the NFP number (199K vs. 400K expected). The fact that the number lagged so much behind doesn’t seem to matter as the wage data surprised on the upside. A 0.5% surprise in the annualised hourly earnings is substantial and is likely to be deemed by the markets as a green light for the Fed to move in March. The probability traders give to the Fed hiking rates in March went up to 79.3% as a result! By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.


US December non-farm payrolls came in at 199K versus 400K expected. We expected to see a stronger number based on positive claims and services sector data and the fact that payrolls in the month of December are often propped up by the seasonal boost that Christmas creates. 

Instead, the number came in at the lower end of analyst expectations. According to Bloomberg, the analyst estimates ranged from 150K to 800K. This fairly wide range in the estimations speaks of the uncertainty the inflation, the Great Resignation and the Omicron variant created.

The unemployment rate was confirmed at 3.9% (4.1% expected) which is obviously good news. Average hourly earnings were also a positive surprise at 0.6% (0.4% expected). This moves the annual rate to 4.7% (4.2%) and highlights the need for the Fed to act in order to reign inflation in. 

Currency markets didn’t react strongly to this report even though the number came in substantially below expectations. The initial reaction was to sell the dollar and buy the commodity currencies but quite soon the markets reversed to the mean and are at the time of writing this report fluctuating near to the pre-announcement levels.

Trade Safe!

Janne Muta
Chief Market Analyst

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