Currencies Quiet Ahead of Jobs Data

Currency traders found very little reason to push currencies one way or the other against the Greenback yesterday or overnight, favouring the “wait and see” approach with regards to this morning’s Non-Farm Employment Change and Unemployment Rate figures out of the US. Most of the majors were contained inside of narrow ranges since the beginning of North American trade yesterday. The USDCAD was once again held up by the 1.0300 figure overnight, as corporate USD buying interest at this level has tempered speculative selling and, for the last couple of days, has put the brakes on any further CAD appreciation. The Loonie even took a breather against the crosses last night, and after tumbling four cents between last week and earlier this week, the EURCAD has had a quiet 24 hours, consolidating around the 1.4000 handle. The Loonie hasn’t been this strong against the euro since Q4 of 2007, and penetrating 1.4000 opens the pair up to downward potential deep into the 1.3000s, where it traded during the beginning of the oil rally, up to almost USD 150.00 a barrel. After a turbulent couple of weeks, the euro steadied broadly overnight, as did the Cable. The euro was contained under the 1.3600 barrier against the Big Dollar and the GBP was held up by support at 1.5000.

While currency traders may have stayed on the sidelines overnight, equities traders certainly did not. Asian markets rallied well as their trading week came to a close, buoyed by positive signs in the Greek situation and a report out of Japan that the BoJ was considering further steps to ease its monetary policy. The report is good news for Japan’s exporters, as a dovish central bank spells weakness for the JPY, therefore making their products more competitively priced on the global stage. Unsurprisingly, Japan’s Nikkei was the big winner on the day, and closed up 2.20%, the Hang Seng was up just over 1.0% at its close, and the Topix added 1.47%. European stocks are up today also as their market week draws to a close, and at the time of writing the DAX, CAC, and FTSE are all up 0.71%, 1.15%, and 0.79% respectively. Should shares manage to hold their gains until the end of trading, it would represent the sixth consecutive day of gains in Europe, which have benefitted from progress on a solution to Greece’s debt woes.

US Jobs Fall Less Than Expected

The Non-Farm Employment Change for February read -36K versus a forecast -56K and month-over-month unemployment dropped to 9.7% when 9.8% was expected. These better-than-expected numbers have given credibility to the notion that the haemorrhaging of jobs in the American labour market is nearing an end. It seems that fears regarding the effect of huge snowstorms in the Unites States last month were overblown, as the huge drop in jobs predicted because of it doesn’t look to have materialized; however, they can always revise today’s reading lower next month. Labour concerns have been on the front burner both economically and politically in the United States lately, as persistently high unemployment and hundreds of thousands of new unemployment claims each week have been a black mark on the current administration’s popularity and a crucial factor holding back the powerful force that is the American consumer. With congressional elections this November, getting the average voter back to work is going to be a critical part of the Democratic agenda.

Forex markets are mixed this morning on the news. The Dollar Bloc currencies have all responded well, and the JPY has taken on its traditional contrarian role and retreated against the market as investors move their funds into riskier high-yielding instruments. Nonetheless, European currencies have not shared in the celebration, and the euro, pound, and Swiss franc are all off mildly against the Greenback as market participants are conscious of the ongoing issues facing the region. The best performer on the morning is the Loonie, which, in the wake of the jobs data, has finally broken the support at the 1.0300 barrier versus the USD. The next major support for the pair is around 1.0230 – a low that it has bounced off twice before. Against the JPY, the CAD is fast approaching its February high around 88.00, where there looks to be strong resistance. With the weakness in Europe this morning, relative strength has helped the CAD break through the 1.4000 level against the euro; however, momentum indicators are starting to look overextended, and a corrective bounce in the pair is needed before further meaningful movement can occur.

Have a great weekend.

By David Starkey, FX Trader
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