The US dollar is broadly lower and stock futures are jumping after the December non-farm payrolls report.
That's not the reaction you would expect from a headline beat and fall in the unemployment rate to 3.5% from 3.7% but the market is instead focusing on softening wage growth. Average hourly earnings growth slowed to 4.6% y/y from 5.1% and that should give then Fed some comfort that they can pause without sparking a wage-price spiral.
At the same time, I have to believe that market participants were far too invested in a strong jobs number today given the ADP data yesterday.
The dollar is falling across the board with USD/JPY down to 133.41 after touching a session high of 134.77 shortly before the data.
USD/CAD is particularly soft after Canadian jobs growth crushed expectations with 104.0K new positions compared to 8.0K expected.
My base case for this year is that the US economy and US consumer hold up better than most expect and this report speaks to that theme. The question then becomes what happens to inflation? With commodity prices much lower and supply chains loosening, there's an argument that inflation can come down as well in a dream scenario for the Fed.
