Week in FX Americas – NFP Hurts Yields, But Aids EM Currencies

A disappointing non-farm payroll has caught the forex market flat-footed. Fx is taking its lead from US fixed income yields. Many investors were looking for a healthy +185k print with an unemployment rate easing to +7.5%. They did in fact get a healthier jobless rate (+7.4%), however, it was heavily influenced by a lower participation rate. Many had been expecting US 10-year yields to be making an assault on +2.75-80%, a rate that would have had USD/JPY making a strong case to test deep into the psychological ¥100 territory. Instead US 10’s is making a case to revisit the +2.50-55% level first.

What investors got was a softer headline (+ 162k) in July, along with negative revisions to June (+188k from +195K) and May (+176k from +195k). The unemployment rate sank to +7.4%, having been expected to edge down to +7.5%. Average hourly earnings (+0.2%) edged down to +0.1%, while the workweek slipped to 34.4 hrs (34.5 hrs). All together this has made for a soft report across the board.

Where to from here? Many will expect emerging market currencies to get some sort of reprieve from here in the short term at least. Already some EM currencies like the BRL and MXN have jumped to a session high against the dollar. There is a strong case for investors to take advantage of the already cheap levels in many of these EM currency bucket. Some investors will take today’s job report to mean that the Fed may not be in a hurry to draw down its stimulus in the short term. By default it should provide more support for these currencies. However, for further US yield and dollar losses, investors will have to hear from the Fed that a September taper is no longer on their cards.


* AUD Reserve Bank of Australia Rate Decision
* GBP NIESR Gross Domestic Product Estimate
* NZD Unemployment Rate
* GBP Bank of England Inflation Report
* JPY Bank of Japan Monetary Policy Statement
* AUD Unemployment Rate
* EUR ECB Publishes Monthly Report
* CNY Consumer Price Index
* CAD Unemployment Rate

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell