This sounds spot on from Robert Sinn…It seems to me that any number above 100,000 including revisions from prior months would be a mild market positive while a soft number below 50,000 would serve to bring the Fed firmly back into play in the mind of the market. However, a number somewhere in the middle (between 75,000 and 100,000) wouldn’t offer much clarity at all and could actually lead to some selling of the news as the market would lack a clear catalyst heading into the weekend.
Not good enough for more easing and not good enough to be a positive is probably the worst number (for markets).
Meanwhile, Citi’s Steven Englander writes that sometimes a “cigar is just a cigar” and that a good number should be seen as good and a bad number should be seen as bad.
The bigger question is how FX will respond. At times we have argued that the fed reaction function is the dominant driver of asset markets, so a weak outcome is asset market positive because of the anticipation of QE3 or other measures. Now we would go with the straightforward view that a strong number is good for risk and bad for the USD. We think the bar is high for additional measures before the election, so the information content of the number is on the state of t economy, not what policy will do. So bad is bad and will lead to US buying and selling of CAD, AUD etc, and the opposite if the number is good.