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Employment Gains!
By Mike Conlon | March 5, 2010
In a scene out of the movie, Trading Places, all eyes were on the US Non-Farm Payrolls report this morning. In today’s version of the Frozen Concentrated Orange Juice crop report, the number game in at -36K jobs lost, vs. an expectation of -65K. The unemployment rate also held steady at 9.7%. So what does this mean for the market today? Well right now there is so much market volatility that it’s hard to get a good read.
This should be positive for risk-taking today as the number was just good enough to show economic progress, but not great enough to bring about talk of US interest rate hikes. However, anything can happen on NFP day so traders need to be on their toes! Just take a look at any chart at 8:30EST to see what I mean.
In currencies:
Aussie (AUD): No real news for the Aussie today as it is higher on risk themes and had a nice pop on the NFP report.
Kiwi (NZD): Same deal for the Kiwi as the Aussie, though it’s bouncing much higher as it has been a bit over-sold the last few days. Between Kiwi strength and Yen weakness, that pair is the largest gainer, up 2.18%.
Loonie (CAD): The Loonie is also higher, as the market has decided that risk-taking is the flavor of the day as the market digests the impact of the NFP report. Oil is also higher to just over 81, adding to Loonie gains.
Euro (EUR): What more can be said about the Euro at this point? The Greek crisis is center-stage, with Greek austerity measures angering its citizens, and the potential bailout and contingency plans upsetting the Germans. Quite the balancing act going on there. The Euro is down against all but the Yen.
Pound (GBP): Producer prices came in higher in the UK, and commodity prices are suggesting that they may be experiencing the start of inflation. The increase of 4.1% came in higher than the target rate of 3%, so it will be interesting to see how the BOE handles this situation. The Pound is mixed this morning.
Dollar (USD): I discussed the NFP report above but whether or not the risk-taking theme that has been pushed forward by the forex market continues will remain to be seen. Stocks are expected to see an initial bounce as the futures are higher. However, there is no improvement in the unemployment rate, so market bears may use this opportunity to establish shorts on signs that the economy may be stabilizing but is not improving.
Yen (JPY): The yen is weaker for the second day in a row as it appears as though the market believes the Bank of Japan will boost credit easing. So it appears as though the government may be winning the battle against the Bank of Japan which should weaken the Yen and make it even more attractive as the funding currency of choice for carry traders. It is down across the board this morning.
So while it appears that the market is in a risk-taking mood so far, don’t be so certain that it won’t change its tune by the end of the day. At some point, we are going to have to see actual good news, and not more “less bad”. Unemployment is still extraordinarily high, which will translate over to reduced consumer spending, which makes up some 70% of US GDP.
In my opinion, it would be a fool’s folly to continue to buy stocks and commodities on interest rate policies alone and not fundamentals. At some point this will catch up to the market. It always does.
Good weekend to all!
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Topics: What To Look At In The Market |
March 7th, 2010 at 12:13 am
Nice information. Keeping in view the recent gain in unemployment, will the USD outperform the euro in coming week? What’s ur opinion about that?