The US economy created 192K jobs in February, and the unemployment rate fell to 8.9%. January's non-farm payrolls were revised higher to show 63K jobs gained compared to the original 36K.

The market may have been expecting an even stronger reading (200K or more), and in its aftermath we saw a tug of war between the USD's bulls and bears, especially in the EUR/UDS pair.

Taking a look deeper into the data we see that private payrolls rose 222K (the best reading since April 2010), with 122K jobs created in the services sector and 33K in manufacturing. Government payrolls fell by 30K.

The figures point to a rebound in the labor market, with the unemployment rate falling below 9% for the first time in nearly 2 years. This time the drop in the unemployment rate came even as the participation rate remained about the same as the previous month. The previous drops in the unemployment rate came more as a result of more discouraged workers dropping out of the labor force as they gave up looking for work, retired, or went back to school. The Fed sees unemployment to be in the 7.5% to 8% range by the end of 2012. If the unemployment rate falls faster than Fed models predict it could be one step towards the Fed beginning to think about tightening monetary policy.

This report on its own will probably not sway the Fed's opinion. A few months of strong sustained job gains are needed at this point, unless we had a much stronger than expected figure (say 300K jobs created) which did not happen. Therefore the Fed's ultra loose policy will continue to be an anchor around the USD's neck until we see the Fed policy shift.

What today's data may do however is continue to solidify the thinking that the US economy continues to gain momentum. That will be a boost to risk appetite and global growth outlook. That can help those investors looking for higher yielders and riskier assets abroad. They will fund that search with currencies that have very low interest rates like the USD and JPY. Therefore the USD can still weaken even as the economy posts a strong jobs number. Again we have to look at the expectation of the market coming into the report and we saw anticipation of an even stronger figure.

However, with the economy strengthening in the US, the chance of further monetary easing recedes, while in Japan that possibility is still there. Therefore, the USD/JPY may be the biggest benefactor in terms of USD strength on the back of its economy. That is because US yields are likely to climb making US Treasuries more attractive than their Japanese counterparts. That did not show in today's trading, but may be more apparent after we come back from the weekend.

We'll have more thoughts on the NFP and its implications for the USD and the currency market over the weekend.