Dollar Shrugs Off Jobs Data

Non-farm payrolls sent a powerful signal about US dollar demand. Oil jumped in early trading but FX moves have been minimal. Weekend data continues to show softening Chinese trade.There are currently 7 Premium trades in progress.

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When something can't fall on bad news, it often won't fall at all. That's the lesson from non-farm payrolls on Friday. Jobs growth missed estimates at 160K versus 202K expected and a 0.2 pp drop in the participation rate was the only thing that kept unemployment from rising.

The kneejerk reaction was a 50-pip drop in the US dollar across the board but that turned out to be the extreme of the day. USD quickly bounced back and then continued higher. Some of it may have been fractionally better wage growth but underlying US dollar demand was clear.

A similar theme played out throughout the week, including after weak ADP jobs data. It's still very early in a potential US dollar bounce but it passed the NFP test with flying colours.

On the weekend, China released April trade balance data. The good news was that the trade surplus was $45B compared to $40B expected and that will support GDP. However, it came as overall trade slumped. Exports fell 1.8% y/y compared to a flat reading expected while imports tumbled 10.9% y/y versus the -4.0% consensus. It wasn't a one-off month either as trade in the Jan-April period is down sharply.

Some slowing in trade was expected given the shift away from infrastructure spending but the hope was that Chinese consumers and better global growth would pick up the slack. That's clearly not happening.

One spot to watch early in the week is oil as WTI jumps $1.06 to $45.72 in early trade. The April high was $46.78. The forest fire in Canada has taken about 1 million barrels per day out of production. The fire continues to grow but the predominant winds are now pushing it away from the oilsands.

Commitments of Traders

EUR -23K vs -40K prior JPY +61K vs +66K prior GBP -40K vs -49K prior CHF +7K vs +9K prior AUD +52K vs +59K prior CAD +19K vs +12K prior NZD +9K vs +7K prior

These are the first look at positioning heading into the Fed and BOJ. The market has largely scaled out of US dollar longs. Heading into the RBA, Australian dollar speculators were deeply offside but appeared to be scaling back.