â€˘ US Dollar Fails to Respond to Blowout Payrolls Number: What Gives?
â€˘ Euro On its Way to 1.50 Now that the French Have Stopped Screaming
â€˘ Canadian Dollar Hits Record High Following Strong Employment Numbers
US Dollar Fails to Respond to Blowout Payrolls Number: What Gives?
Next to the Federal Reserveâ€™s interest rate decision, non-farm payrolls was the most anticipated event risk this week and it did live up to its reputation of being market moving, particularly on an intraday basis. However the reaction in the US dollar was not what everyone expected; it has puzzled most traders who wonder why a number that doubled expectations could have sent the US dollar to a fresh record low against the Euro and Canadian dollar. The US dollar did rise in the seconds after the release, but the move completely reversed within five minutes. Theoretically the sharp rise payrolls should give the Federal Reserve more reason to keep interest rates unchanged even though the underlying details of the report were somewhat softer. The breadth of job gains (also known as the diffusion index) and average hourly earnings were weaker than expected. The unemployment rate on an unrounded basis also increased from 4.696 to 4.727 percent. Yet these details are probably not the reason why the dollar fell because they do not have the significance to offset the blowout headline number. Instead, the price action in the market today reflects everyoneâ€™s unwillingness to buy dollars. Those who want to be long are already long and any â€śnewâ€ť positions being taken are mostly on the short side. If the US dollar canâ€™t rally on strong economic data, what will it rally on? We think that the dollarâ€™s rally will come to an end only when the Federal Reserve ups their degree of hawkishness or the European Central Bank cries uncle and finally warns that the Euroâ€™s rally has become too excessive. We may actually get part of this opportunity next week when Bernanke testifies before the Joint Economic Committee. Besides that, the only numbers worth watching in the
Euro On its Way to 1.50 Now that the French Have Stopped Screaming
If the Euro manages to close above 1.45 against the US dollar, it could once again be on its way to hitting 1.50. Despite slightly weaker economic data, demand for Euros or distaste for US dollars continues to grow. Both German and Italian manufacturing PMI dropped last month even though the French and overall Eurozone number remained unchanged. Todayâ€™s rally may be partially due to comments from the French who in the past were the most vocally opposed to Euro strength. The French Secretary of State said this morning that they are resolving their arguments with the ECB because they have realized that the stronger Euro is helping keep prices under control. This is the main reason why the ECB is so stubbornly hawkish. With oil prices climbing close to $96 a barrel, foreign nations are scrambling to keep prices under control. ECB President Trichet next week, who will be speaking after the bankâ€™s monetary policy meeting, should share this sentiment; interest rates are expected to remain unchanged. Aside from that, we are also expecting service sector ISM, Eurozone PPI, retail sales, German manufacturing data and the German trade balance. As for the Swiss franc, consumer prices were stronger today, but that did little to pressure EUR/CHF. Next week, the Swiss unemployment rate and SECO consumer climate survey are due for release.
Canadian Dollar Hits Record High Following Strong Employment Numbers
It seems like nothing can stop the Canadian dollar, which is rising again on the back of strong employment numbers and the continual rise in oil prices. Todayâ€™s Canadian labor market report reflects the countryâ€™s economic strength. The number of jobs added last month was five times more than the marketâ€™s expectations driving the unemployment rate down to a 33-year low. September housing starts were also revised to the highest on record. With a strong labor and housing market, the Canadian economy has become far more immune to
British Pound Hits Highest Level Since 1991
The British pound rose for the seventh day in a row to hit the highest level against the US dollar since 1991. Traders continue to shrug off weaker economic data, which indicates that the currencyâ€™s strength has been primarily due to dollar weakness than improving
Dow Meltdown Leads to Carry Trade Liquidation - The Japanese Yen crosses are all stronger today as the Dow ends the