In truth, the report wasn't as bad as it looked
The US dollar fell hard on the release of the September non-farm payrolls report. The US added just 194K jobs compared to 500K expected. It's the second month in a row of weak job additions and signals that the latest wave of covid hit harder than anticipated.
In particular, food service jobs have been weak in a sign that people were staying home.
There were good signs in the report though with the unemployment rate dropping to 4.8% from 5.2%. Some of that was people dropping out of the work force but overall it highlights a solid jobs market. Guy Lebas from Janney also highlights potential problems from seasonal adjustments:
Aside from the caveats, what this means is that the Fed doesn't need to rush into a taper. Powell said he wanted to see a 'reasonably good' report to taper and this is barely decent. It's good enough to get the ball rolling but will slow down the Fed officials who want to see a quick taper. Expect a lively debate about the monthly size of the taper.
The dollar dropped on all fronts on the headlines, falling 25-40 pips across the board before steadying. I'm weary of post-NFP moves but USD/CAD is an interesting one. Canada added 157K jobs itself in an country that's 10x smaller.
The pair fell to 1.2497 from 1.2543. That's narrowly through the September low to the worst levels since August 11. I highlighted the bear case in that pair yesterday.
