Nonfarm payrolls triggers dollar to rally - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: The US dollar closed higher, US equities made record highs, and bond yields closed lower in the wake of the US payrolls report. Oil made a two-year high.

Interest rates: US 10yr treasury yields fell from 2.35% to 2.32% in response to the payrolls data, later rebounded to 2.36%, and ended the day at 2.33%. Fed fund futures yields continued to price the chance of a December rate hike at 97%.

Currencies: The US dollar index only briefly dipped following the payrolls data, closing the day 0.3% higher. EUR fell from 1.1660 to 1.1600. USD/JPY fluctuated between 113.60 and 114.40, closing little changed at 113.97. Underperformer AUD was affected by earlier disappointing retail sales data, extending its decline to 0.7639. NZD fell from 0.6950 to 0.6898. AUD/NZD traded in a slightly lower range of 1.1060 and 1.1100.

Economic Wrap

US non-farm payrolls rose 261k in Oct (vs 313k expected, although there were +90k in revisons for the previous two months), but the unemployment rate fell from 4.2% to 4.1% due to a fall in the participation rate from 63.1% to 62.7%. However the data was probably distorted by hurricane disruptions. Average hourly earnings grew 0.0% (vs 0.2% expected, which was probably optimistic since it implied 4% annual wage growth). The data has little to no policy implication, and shouldn’t sway the Fed from an almost certain hike in December. Factory orders rose 1.4% in Sep (vs 1.2% expected). ISM non-manufacturing activity rose from 59.8 to 60.1 (vs 58.5 expected)."