US NFP Data for October

• NFP 150k vs 180k estimate, September’s 336k print revised lower to 297k. Unemployment rate 3.9% vs 3.8% exp
• Fed funds futures lower estimates of another Fed hike this year
• Immediate market reaction: USD, yields drop while gold rises
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

NFP Prints at 150k vs 180k and September’s Figure Revised Down to 297k

Non-farm payroll data for October disappointed estimates of a 180k coming in at a 150k. In addition, the unemployment rate rose slightly from 3.8% to 3.9% while average hourly earnings posted mixed figures, rising year on year but cooling slightly month on month.

The data comes after the FOMC meeting earlier this week where the Fed maintained its hawkish stance but sprinkled in dovish concerns around the ongoing tightening (via elevated US yields) and the potential for a change in economic fortunes into year end.

Earlier this week other labour data like ADP employment change and the JOLTs report revealed a miss versus the estimate and little change in job openings respectively. The Fed has been calling for a period of below trend growth and a moderate rise in unemployment to help calm inflation, something that could very well be underway.

The recent sell off in the bond market may well have seen its peak as treasury yields and the dollar move steadily lower. in addition Fed funds futures suggest an even lower probability of another rate hike before the end of the year with potential rate cuts creeping slightly closer. Markets will be scrutinizing future economic data for any signs of weakness that would strengthen the viewpoint that interest rates in the US may have already peaked.

FedWatch Tool Showing Implied Probabilities of the Fed Funds Rate in December

Source: CME FedWatch Tool, prepared by Richard Snow

Immediate Market Reaction: USD, Yields Down, Gold Gains

The dollar dropped on the print rather unsurprisingly. The market had still been holding on to the idea that the Fed may be forced into another hike based on US outperformance in recent fundamental data. Market perceptions of the FOMC meeting midweek (hawkish with dovish undertones) sent the dollar lower and the NFP miss adds fuel to the fire.

US Dollar Basket (DXY) 5-Minute Chart

Source: TradingView, prepared by Richard Snow

The 2-year US treasury yield dropped around 2.7% in the moments following the release, as markets reassess the likelihood of another rate cut from the Fed.

US 2-Year Treasury Yields 5-Minute Chart

Source: TradingView, prepared by Richard Snow

Gold also witnessed a sizeable move but to the upside as the weaker US dollar provides an instant discount for foreign buyers of the precious metal. Could the metal rise further after witnessing an increase in bidders into the weekend as traders brace for any potential conflict escalations in the Middle East - although, this effect has been less apparent after the Israeli Prime Minister said the war would be a long one.

Gold (XAU/USD) 5-Minute Chart

Source: TradingView, prepared by Richard Snow

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