Dollar Soars as Blizzard Does No Damage to Payrolls

Last updated 3/5/2010 8:57 AM ET (GMT -5) 1 Comments

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Kathy Lien

Director of Currency Research, GFT

Non-farm payrolls fell by only 36k in February sending the U.S. dollar into the stratosphere. With economists looking for job losses to swell by as much as -150k, the smaller decline turned out to be very positive.  Despite all of the fears of a shockingly weak payrolls number and the warning from Obama's Economic Advisor Larry Summers of large storm related job losses, the U.S. economy averted what could have big an extremely weak labor market report. The blizzards in the Northeast clearly did no damage to the labor market.  In fact, traders have bought dollars aggressively because without the winter storms, job growth probably returned.  

The most encouraging part of the labor market report was the rise in service sector jobs. There has now been positive job growth in services 3 out of the past 4 months.  Temporary hiring continues to be strong, which is the first sign of a turnaround in the labor market.  Companies prefer temporary hires at the beginning stages of a recovery and permanent hires once the economy has stabilized.  Education and healthcare is another sector that also added jobs.  The better than expected non-farm payrolls report kept the unemployment rate at 9.7 percent but unfortunately the labor statistics were not unambiguously good.  The manufacturing sector only added 1k jobs, average hourly earnings growth slowed to 1 percent and average weekly hours worked fell from 33.9 to 33.8.  

Nonetheless this will down downplay the upside surprise in the non-farm payrolls report. With everyone relieved that payrolls did not fall by 50k let alone by more than 100k, we expect the dollar to continue to rise against the Japanese Yen.  Even though the dollar initially rose against the euro, risk appetite could sweep the currency pair into positive territory.  If the Federal Reserve is watching (and they are), the better jobs number will give them another reason to continue normalizing monetary policy.

Comments (1)

Darell

March 05, 2010 at 12:52 PM ET

When the report come out next week should we see big moves in the CCY.

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.