Forex News: The Dollar Roars Back With Jump in NFPs, Eyes Turn to Election

The Takeaway: Greater than expected increase in Non-farm Payrolls >> Improving jobs market removes expectations for further Fed stimulus >> US Dollar Rallies

The October US labor market added an impressive 171k non-farm jobs versus an expected 125k in the final employment report before the November elections. The US dollar gained sharply against all major counterparts, especially the Japanese Yen and gold as signs of an improving economy start to erode expectations for more stimulus from the Federal Reserve. The report was also a boon for risky assets in other markets, as US and world equity futures as well as crude erased previous losses on the heels of the report.

October Labor Reports	Actual	Exp	Previous	Revised From
Change in NFPs	171K	125K	148K	114K
Unemployment Rate	7.9%	7.9%	7.8%	--
Change in Private Payrolls	184K	123K	128K	104K
Change in Manufacturing Payrolls	13K	-4K	-14K	-16K
Underemployment Rate	14.6%	--	14.7%	--

Today's report represents the largest gain since the August NFP report, where the labor market added 192k non-farm jobs. The string of large gains since July 2012 along with better consumer confidence further supports expectations that the US economy is improving despite ongoing economic worries in Europe. The better data is expected to remove expectations for more stimulus in the world's largest economy, and may bring an early end to the Fed's QE3 purchases of $40 billion in mortgage backed securities per month. Even with these welcomed improvements, the central bank may not move as quickly to tighten to prevent stepping on the economy too quickly. Boston Federal Reserve President Eric Rosengren stated on Thursday that he supported asset purchases until unemployment fell to 7.25%, and a zero-interest rate policy until the rate dropped to 6.5%. Atlanta Federal Reserve President Dennis Lockhart also hinted at no quick exit from additional asset purchases despite better economic data.

Generated with FXCM Trading Station. USDOLLAR Index 5 minute chart, vertical line indicates time of data release.

The US dollar rallied against key counterparts after the report. At the time of writing, the US dollar is higher by 0.702% against the Euro, 0.572% against the Japanese yen, 1.10% against gold and 1.51% against silver. Equity futures are gaining on higher risk appetite, with the benchmark S&P500 up by 0.464% at 1430 and Dow Jones Industrial Average mirroring with at 0.311% gain at 13200.

--Written by David Liu, DailyFX Research