Non Farm Payroll recognised its own importance Friday, turning markets upside down and on their collective heads, with a destructive miss in expectations. NFP was expected to add 978,000 jobs, but managed a paltry 266,000, while reviewing the previous months jobs lower from 916,000 to 770,000! This was a dramatic turnaround in direction and forecasts. Equity market quickly turned the negative into a positive. The reversal in employment recovery was interpreted as an assurance that the Fed would continue QE infinity for infinity! Stocks rallied strongly and the Dollar collapsed. The EUR surged, to trade 1.2170, while the GBP blew through 1.4000!
The drama on US markets is likely to continue into the new week as the ramifications are considered and digested. This is real bad news. The US economic recovery was dragging global optimism. This may signal an extended period of monetary and fiscal largesse. It will drive the US Dollar lower and force bubbles across most asset classes to expand to even more dangerous levels. Iron Ore is toying with USD $200/t! This is a great boost for commodity currencies, with the double whammy, of a weaker reserve. The NZD jumped to 0.7280, while the AUD traded 0.7850, following the RBA confirming bullish domestic economic conditions.
The coming week will open with the shocking NFP number still driving markets and analysts will closely watch growth and inflation data releases during the week.