Forex Crystal Ball
Non-Farm Payrolls in the month of December shocked the financial markets by increasing only 18k, which is almost as bearish as negative job growth because the last time we saw levels worse than this was in August 2003 when the US economy shed 42k jobs. The US dollar fell 100 pips against the Japanese Yen in a blink of an eye and rallied by almost the same amount against the Euro and is 100-150 pips away from my previous prediction on the USD-JPY.

The expectations are that slump in the housing sector may continue thru 2008-therefore jobs will be the key indicator of whether the US consumer will continue to spend at a level which will prevent the economy from falling into recession. The problem is that job creation is been weakening over a long period of time and hence supporting a further rate cut in the next Fed meeting. Further evidence are seen in sectors that reported more job losses than job growth with the biggest contraction seen in manufacturing, construction, retail trade, information and financial sectors. The unemployment rate also increased from 4.7 to 5 percent, a 2 year high.

Since the headline number turned out disappointing, the Equity and Carry Trade markets are taking a big hit and could go into a downward trend that lasts for day and the bias against USD pairs will continue.



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