Big NFP Miss Puts CPI In Focus

Yikes! That was our first reaction after seeing Friday’s NFP print.

With this type of big divergence between expectations and actual data, it might have been more appropriate to have called last week’s NFP estimates “guesses” rather than “forecasts”. 

Despite the miss, there were some positives under the hood.

So, how did the markets take the bad NFP print on Friday? Pretty much as you would expect, apart from a twist at the end. Equities pushed higher as the miss means that policy normalization is some distance away for the FED.

The Dollar pushed lower as Eurodollar futures started to push back rate hike expectations. The surprising move though was the fast U-turn in US10Y, which was mostly driven by the jump in inflation expectations.

Even though the report saw a big miss on the headline, the earnings saw a decent print. Combined with the low headline print saw market participants fearing a rise in wage inflation as companies might need to hike wages in order to incentivise people to join the labour force.

That means this week’s CPI is in focus for the week ahead – and that could mean some interesting moves in US10Y. As such, it could be an interesting week for the USDJPY.

We’ll go through all of that in this week’s video.