What The Disappointing Nonfarm Payrolls Report Means For The U.S. Dollar
BlackBull Markets | Oct 11, 2021 09:11PM ET
The Nonfarm Payrolls report (NFP) is making a habit of missing its forecast by wide margins. September's NFPs were rolled out on Friday, revealing a meager 194,000 jobs added to the US economy last month.
The NFP report wouldn't have been as disappointing if forecasts had not predicted 500,000 jobs added in September.
Job growth held to expectations within the leisure, hospitality, and retail sectors, adding a combined 130,000 jobs to the economy.
However, a steep decline in education and healthcare professionals across the US severely undermined NFP predictions, down by 161,000 and 18,000, respectively.
h2According to Federal Reserve Chair Jerome Powell, the US economy would need a "decent" September NFP for the Fed's planned bond-buying slowdown (tapering) to remain on track for November.
Without Powell's definition of "decent" or a stated value that meets that definition, the market might have to scramble to figure out what the September NFP will mean for the Fed's tapering roadmap.
As it stands, the US dollar index is struggling to maintain momentum above the 94.00 level. A reversal or delay in the Fed tapering may expose further weakness in the USD.
h2The markets will have a couple of days to decipher what the Fed might do in response to the lackluster NFP.
On Wednesday, the Federal Open Market Committee (FOMC) minutes, followed by several speeches from Fed representatives, should make things more transparent. Speeches from Lael Brainard on Wednesday and John Williams on Friday would be the most important in determining USD's movement in the weeks ahead.
h2 The Three Additional Economic Reports That Could Move the Dollar this Week/h2
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On Wednesday, data concerning the rate of inflation in the US, comes out. Inflation in the US is forecast to remain stable at 5.3%.
Used vehicles, one of the main culprits for the high inflation in 2021, have begun to subside in price. Supply constraints across multiple industries may be picking up this slack and slowing the pace at which inflation drops.
Alternatively, supply constraints could pick up more than just the slack left by falling used vehicles, and with it, push inflation back in line or beyond the pandemic record of 5.4%.
San Francisco Federal Reverse President Mary Daly commented over the weekend pushing back against the idea that inflation is here to stay, throwing inflation's new instigator, 'supply constraints,' under the bus. Daly noted,
"We have these anxious-to-get-out-there-and-spend consumers hitting the wall of supply constraints, and of course the prices are going to rise…But I don't see this as a long-term phenomenon.".
On Friday, expect back-to-back reports. First, US Retail Sales MoM is forecast to remain flat, followed quickly by the Michigan Consumer Sentiment OCT, which is expected to rise by one point or two from 72.8 in September.
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