50K NFP Miss Whisper?

T minus 40 minutes and counting to NFP. Here is what the latest whisper number is, and whether "bad is bad" today, or "really bad is great."

From Citi's Steven Englander

How will risk react on payrolls? Last words


US 10yr bond yields are now 9bps lower than they were at 8:15am yesterday, with just over half the drop on the back of weak US data in NY time. In the past a rough rule of thumb has been five bps on the 10yr is equivalent to a 50k miss on payrolls, so it seems likely that the consensus has shifted somewhat to the left. We would judge that expectations are at least 15k lower in the FX market, driven by weak ADP and Claims. So Citi's 135k NFP expectation may now be close to consensus, rather than at the low end.


In terms of market reaction we have seen USD bought over the last 24 hours on weak US data, weak Chinese data and weak European data, so it seems likely that it will be bought again if payrolls disappoint.  There is some debate as to whether a strong number would strengthen the USD on the view of the US as a safe haven, but we would expect on the first instance that stronger than expected USD would lead to the USDS being sold on the first instance. If the last two days are any guide on a weak number you would buy USD or JPY and sell MXN, CAD and other EM and G10 commodity currencies. 


A last question is how bad a number it would take to put QE back on the radar screen. Most analysts do not expect additional stimulus largely on the view that the global crisis has taken US rates down further than any QE would be expected at this point. However, it seems possible that a combination of weak headline month and downward revisions could re-write history sufficiently to make QE a runner – but this is an outside chance.


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