NFP Recap and Week Ahead

The official US jobs report for January that was released on Friday morning was highly positive, easily beating expectations on both the headline data and, very importantly, wage growth. 200,000 non-farm jobs were added to the US economy in January against prior consensus expectations of around 180,000. Additionally, December’s initial 148,000 disappointment has now been revised up to a somewhat less disappointing 160,000.

Perhaps even more telling, however, were the wage growth figures. Annualized wage growth in January hit a long-term high of +2.9%, a rate of growth not seen since 2009. On a monthly basis, average hourly earnings grew by 0.3%, higher than the expected 0.2%, and December’s monthly wage growth was revised up from +0.3% to +0.4%. The unemployment rate for January remained steady and in-line with expectations at 4.1%.

The combination of strong job creation and unexpectedly robust wage growth prompted sharp market reactions, as anticipation of higher inflation and interest rates continued to build substantially. US Treasury yields extended their recent rise to new long-term highs, and the US dollar spiked sharply while gold prices plunged. US equity markets suffered a significant hit, extending the sell-off that began early this week on fears of accelerated interest rate increases.

Whether the jobs report’s substantially positive impact on the US dollar on Friday results in any bonafide rebound and recovery for the ailing currency remains to be seen. However, the anticipation of higher interest rates was strong and increasing well before Friday’s jobs data, and it still failed to provide the greenback with any respite from its persistent weakness. Therefore, it remains questionable whether the dollar can overcome strong bearish sentiment, even in the wake of the stellar US jobs report that was just released.

Events in the very busy week ahead shift temporarily from a focus on the US dollar to other major currencies, including the British pound, Australian dollar, and New Zealand dollar. This is primarily due to three corresponding central bank decisions scheduled for next week, along with a slew of key economic data releases. Some of the most important events are as follows:

Monday, February 5th:
- UK Services PMI
- US ISM Non-Manufacturing PMI
Tuesday, February 6th:
- Australia Retail Sales
- Australia Trade Balance
- Reserve Bank of Australia Cash Rate and Rate Statement
- Canada Trade Balance
Wednesday, February 7th:
- New Zealand Employment Change and Unemployment Rate
Thursday, February 8th:
- Reserve Bank of New Zealand Official Cash Rate, Monetary Policy Statement, Rate Statement, and Press Conference
- Bank of England Official Bank Rate, Monetary Policy Summary, MPC Official Bank Rate Votes, and Inflation Report
Friday, February 9th:
- Reserve Bank of Australia Monetary Policy Statement
- UK Manufacturing Production
- Canada Employment Change and Unemployment Rate

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