ISDA Triggers Default, US Jobs Add Up

Greece triggered CDS late on Friday but it was largely a non-event. In the US, continuing jobs growth helped to boost the dollar, which was the best performer. The impact of the US jobs report on EUR was as anticipated in the Monday & Wednesday Premium pieces. The euro lagged and CFTC data showed a renewed rise in short interest. Fridays Premium trades & charts are below.

After a long wait, the ISDA finally ruled that Greek collective action clauses were a credit event, triggering credit-default swaps. The market had plenty of time and forewarning to deal with the news and aside from modest selling in the stock market, it was not a factor.

The market-driver on Friday was news that the US added 227K jobs compared to the 210K reading expected. Revisions were also to the upside and the underlying metrics of the report were strong. In a departure from the risk on/risk off trade, the data provided a boost to the US dollar as QE3 expectations were pared. We expect the relationship between positive

US data and the dollar to continue.

Trade data was a minor USD negative as it the January deficit fell to the worst since 2008 on heightened energy imports. Hidden inside the report, however, was news that US machinery exports were at a three-year high a sign of a pickup in manufacturing.

The only currency to outperform USD on Friday was CAD, as it piggybacked on the economic strength of its neighbour and responded to a domestic employment report that saw the unemployment rate fall to 7.4% from 7.6%.

CFTC data showed euro shorts increasing to 116 after several weeks of declines to 110. The markets sharp turn against the yen continues as shorts grew to 19K, just over a month ago, the market was long 60K. AUD and NZD longs were pared while CAD longs increased to 26K from 22K.

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