Intraday Market Thoughts

USD Absorbs Post NFP Losses, SNB Peg at Risk

by Adam Button
Apr 9, 2012 0:57

US Non-farm payrolls were far weaker than expected on Friday, raising fresh questions about the QE3 and the US recovery. The US dollar and neighbouring CAD have been sold heavily while the yen has surged. EUR/CHF is right up against the SNB floor as liquidity dries up for the long weekend. Thursday's Premium Intermarket Insights remain in progress. See below for more detail on those trades.

The US added just 120K jobs in March compared to the 203K expected. The unemployment rate fell to 8.2% from 8.3% but it was a misleading signal because of drop in labour force participation. Had the rate of participation remained steady, unemployment would have risen to 8.4%.

There was no silver lining in the report and the market reaction was swift with USD/JPY falling to 81.30s. Other trades were choppy as dollar selling competed with risk aversion. EUR/USD initially jumped a half-cent to 1.3107 but most of the gains later faded. Stock markets were closed S&P futures traded for a short period before closing 20 points below fair value, or down 1.2%.

Bonds sent strong signals about a renewed likelihood of QE3. US 10-year yields fell below important support at 2.09%, touching as low as 2.04%.

EUR/CHF slumped in the post-NFP volatility, touching 1.2008 and then barely recovering to 1.2011. On Thursday, a wall of roughly $9 billion in bids from the SNB was seen at the peg but officials may try to exploit illiquid markets over the 4-day European holiday to give themselves some breathing room.

The latest Premium Intermarket Insights set ahead of Friday’s US jobs report remain in progress; charts on USD Index & trades on EURJPY, AUDUSD, USDCAD and US crude. Access to today's Insights: Nonsubscribers pls click here:


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