Ok, so a quick NFP take here.
That was probably just the number we needed heading into the weekend given Thursday’s action and given what we’ve seen over the past four or so sessions.
As noted yesterday in “More Trouble,” things looked to be getting a bit out of hand as far as rates go, with Treasurys plunging and the market seemingly starting to price in a Fed that thinks it’s behind the curve. That set the stage for stocks to sell off with bonds (call it “tantrum” jitters)…
…and then, in the background, we had a deflationary bombshell as crude collapsed in what, to at least one observer who spoke to Bloomberg, “felt like a balloon popping”…
So given that, the modest jobs beat (or, what some might call a “mixed report” as opposed to what Breitbart calls a “sizzling, jaw-dropping, great again, blowout, rocket“) was probably just what the market needed. Enough to put a bid under stocks but not enough to meaningfully change the Fed’s calculus about the trajectory of normalization post-March hike.
As it turns out, at least one FX trader agrees. “This is Goldilocks data – just right for Fed to hike, but not enough to accelerate what is already priced in,” John Hardy, head of FX strategy at Saxo Bank said, adding that “USD is consolidating because the market was positioned for more of a blow-out positive number.”
“I don’t think the USD will drop too far though, because there’s still a risk that the Fed will signal more aggressive tightening cycle at March meeting,” Shaun Osborne, chief FX strategist at Bank of Nova Scotia in Toronto adds. “Any tilt up in the dots or messaging along these lines next week will be USD-supportive. I don’t think the USD weakens too far here. I’m still bullish.”
So basically the same story.
This is what “Goldilocks” looks like on Friday: