Unexpected Jump in Job Losses Dampens Risk

Last updated 10/22/2009 9:07 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

After declining for two consecutive weeks US jobless claims rose an unexpected 11,000 to 531K from 515k projected. The less volatile four week average of initial claims continued to decline albeit at a glacial pace as it moved from 533K to 532.5K.

The jobless numbers have become a key data point of concern for the currency market as they represent the main impediment to any Fed action on the monetary front. The Fed has never raised rates until the unemployment rate has peaked and given the fact that this week is the sample for the monthly Non Farm payrolls report due November 6 ^th it suggests that US may lose another -150K jobs in October.

The data was a mild blow to the recovery trade as euro sold off modestly on the news, dropping below the 1.5000 level after rallying back to that point in early morning New York session. However, overall the market showed little reaction to the numbers given the week to week volatility of the data.

Nevertheless, the currency traders are unlikely to change their anti-dollar bias until the weekly jobless numbers drop below the key 500K level suggesting that the contraction in the US labor market is over. Only then will the Fed be able to adopt a more assertive monetary posture providing a modicum of support for the greenback.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.