THE TAKEAWAY: USD ISM Manufacturing (JAN) > 53.1 versus 50.7 expected, from 50.2 (revised from 50.7) > USD ISM Prices Paid (JAN) > 56.5 versus 56.0 expected, from 55.5 > USDJPY BULLISH
Is the US manufacturing sector turning the corner? Despite only tepid jobs growth the past year – today’s Nonfarm Payrolls report showed that +4K manufacturing jobs were added, below the twelve-month moving average of +9K – the sector is reporting its best growth prospects since April 2012. The actual figure of 53.1 came in well-above the consensus forecast of 50.7, eclipsing all estimates provided by Bloomberg News; or, no one was anticipating this type of strength in the manufacturing sector.
The uptick in growth prospects coincides neatly with a stronger US consumer, as evidenced by 4Q’12 growth figures released on Wednesday. Consumption is improving, business investment is improving, wages are rising, and the savings rate has increased. While the payrolls tax hike resulting from the US fiscal cliff/slope deal could dampen consumption in the 1Q’12 overall, it should only be a near-term setback. Further US economic strength is wholly contingent upon the results of the upcoming sequester fight.
USDJPY 1-minute Chart: February 1, 2013
Charts Created using Marketscope – Prepared by Christopher Vecchio
In reaction to the data, the Japanese Yen collapsed across the board, with the USDJPY rallying from 92.00 to as high as 92.60, at the time this report was written. Elsewhere, the EURJPY rallied from US session lows at 124.83 to as high as 126.88 – over +200-pips in just under two hours!
--- Written by Christopher Vecchio, Currency Analyst
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