Forex Investment and Currency Trading

NEWS
US May non-farm payrolls drop 49,000, unemployment jumps to 5.5% - worse than expected.  Consensus was -60,000 with 5.1% unemployment.  This compares to 5.0% in April and -28,000 NFP.  There were net -15,000 more NFP losses from revisions.  Biggest job losses were in transport/utilities at -41,000 with goods production overall losing 57,000 and construction 34,000.  Only major gains were in Government up 17,000.

The loss of jobs in the household survey April to May was 1 million and the jump in the size of the workforce was over 700,000 – those are huge swings and they suggest that the 5.5% is overstated in the pain of the jobs in the US economy – but 5.0% was clearly overstated. Pool of available workers grew 7% in May after dropping 1.3% in April – those matter when you calculate your national unemployment rate.  If you strip out seasonal distortions and noise 0.3% is probably the right amount to expect for the increase – so 5.3% unemployment rate would still be horrible – and its also bad to see the breakdown in jobs from the NFP – with job gains only in rentals, government and hospitality – this is a signal of real economic weakness.  So the move in the US rates will surely translate into a much weaker USD now – despite the Bernanke warnings Tuesday – we are in a new world of pain for FED credibility – as wage costs were higher, growth is surely lower and the ability of the FED to hike despite unemployment going up is zero.  Risk of 1.58 EUR seems higher now than 1.54 – making this a very difficult week for many traders who have been severely whipsawed.  The only good news is that the rate hikes priced into the US market are unwinding a bit – perhaps helping some of the rate sensitive equities – but many people doubt that as well.  Oil up over $3 may be a bigger driver.