US NFP data increased by 467k in January 2022 versus consensus forecast of only 150k. The US dollar also rose.
The US dollar index (DXY) on Friday moved up from a two-week record low. As news was written in Monday's Asian session (7/February), the greenback continued its climb to the 95.60s range. The rebound was triggered by the release of the most recent US employment report which turned out to be shinier than the consensus forecast.
The US Bureau of Labor Statistics (BLS) reported that the number of Non-farm Payrolls (NFPs) increased by 467k in the period January 2022; deflected earlier consensus forecasts of just 150k. US NFP data for December 2021 was also updated to 510k from the previous report of 199k.
Data on the US unemployment rate increased slightly from 3.9 percent to 4.0 percent in the January period. However, the news was sidelined amid the good news of growth in payrolls and employee salaries. US Average Hourly Earnings recorded a rapid increase from 5.0 percent in December to 5.7 percent in January, whereas previous consensus had only forecast an increase of 5.2 percent (Year-on-Year).
The fact that the US economy created more jobs over the past two months increased market optimism for a larger rate hike at the FOMC meeting next March. Moreover, the rapid growth in salaries indicates a stronger upward pressure on the inflation rate.
“That 0.7 percent (Month-on-Month) increase in payrolls was the most hawkish,” said Daragh Maher, head of FX strategy at HSBC, “This helped address concerns about the weakening real earnings pressures against the dollar and themes of stagflation, and is likely to stagnate. energizes the FOMC (Federal Open Market Committee) hawkish figures."
Following the release of NFP data, the 2Y and 5Y US Treasury yields reflecting interest rate expectations also rebounded. Yield 2Y increased to 1.2970%, a one-year record high. The 5Y yield soared to 1.79%, the highest record since July 2019. Meanwhile, the 10Y yield returned to occupy the area above the 1.90% threshold.
Futures markets imply expectations of five Fed rate hikes in 2022 for a total tightening of 134.5 basis points. Fed officials had previously dismissed speculation of an excessive rate hike, but the probability of a 50 basis point rate hike in March has risen from 18 percent to nearly 40 percent.
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