Market shrugs off Payrolls miss, as pound, tech and bitcoin steal show

US Payrolls, the latest from the Fed and Sterling's rally - everything you need to know from the markets this week.

The US payrolls report for October showed a 261k increase in payrolls for October. The unemployment rate fell further to 4.1%, however wages remained stagnant last month, with the annual rate falling to 2.4% from a downwardly revised 2.8% in September.

 The market was initially disappointed with this report, as the headline payrolls figure was more than 50k lower than estimates. However, the NFP figure itself is not too much to worry about for two reasons: 1, this report was difficult to read due to the disruption caused to September’s figure by the hurricanes, and 2, one should expect the US economy to create fewer jobs as the labour market tightens.

Wages still a prickly issue for the Fed

There is one area of concern: wages. Wage growth was flat last month, which could be down to two factors: 1, further disruption caused by September’s hurricanes and 2, a period of mundane wage growth ahead of this month’s holiday-related hiring spree. As you can see, this month’s data by itself does not give us much information, but if we don’t see wages bounce back in November then doubts could grow about the Fed’s willingness to hike rates in December, especially since this week’s Fed statement made it clear that the Fed is watching inflation developments closely. 

Why traders are ignoring this payrolls data

The market reaction has been fairly minimal. The dollar index has traded in a 40 pip range so far today, and after initially dipping on the news has since recovered. Likewise, USD/JPY has made fresh daily highs even after initially falling on the data announcement. Since USD/JPY is the most sensitive FX pair to the NFP the fact that it was able to bounce back after the release suggests that this data point has not moved the dial for the dollar, which is likely to continue its slow grind higher.

Pound comeback could be cut short

The pound is the main story in the FX space today after bouncing on the back of this morning’s better than expected PMI data. However, although a comeback in the pound is to be expected after Thursday’s BOE-inspired sell off, it needs to close above 1.3080 – the 100-day sma – to get the bulls interested again, until then the path of least resistance for the pound looks lower. EUR/GBP has also faltered today as the pound claws back some losses, 0.8945 – the 100-day sma – looks like key resistance for now.

Apple and Facebook make fresh record highs

Stocks are tantalizingly close to fresh record highs as the slow grind higher continues. Apple is the best performer in Dow so far today and is up some 2% after last night’s results. Its value has now touched $900BN after reports of strong demand for the latest iPhones. This is significantly higher than the value of all the Bitcoins that have been issued, which gives some hope to “traditional” assets, which have been considered at risk of being eclipsed by their crypto counterparts. Facebook however, isn’t doing as well, and is lower after reporting a stellar set of results, including a 60% jump in operating profits. This sell-off is likely a squaring of positions after Facebook reached a record high earlier in the trading session.

Bitcoin to $10,000?

Overall, there are no new themes in the major markets right now. Bitcoin is still benefitting from the news that the CME is going to start offering bitcoin futures on its exchange, which is surely enough to push the crypto behemoth to $10,000 by the end of this year…

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