Updated on: 03-09-2010The FX markets are in pre-payrolls mode on Friday with most currency pairs trading very tightly ahead of the highly anticipated statistics.
Released at 8:30 a.m. EDT, economists expect the U.S. economy to shed 105k jobs in August, adding to a 131k shortfall the month prior. The unemployment rate is expected to rise to 9.6% from 9.5% the month prior. Private payrolls are projected to add another 40k jobs for the month to the prior 71k increase the month prior.
Given the reaction we’ve seen in recent days, the U.S. dollar will likely advance against the euro, pound, and yen, on the back of better than expected results, while weakening against the Canadian and Australian dollars. The reverse is also true for a downbeat result.
Meanwhile, the economic news of the overnight was largely ignored, with a Japanese government source telling Dow Jones Newswires that the government will only intervene to weaken the yen in the event of “sharp fluctuations” in the currency. The report goes on to suggest that a gradual depreciation of the yen would mean no intervention.
Meanwhile, the pound sterling shrugged off a larger than expected decline in the nation’s services PMI, which dropped to 51.3 in August from 53.1, despite expectations for a 52.9 level.
The Swiss franc also failed to react materially to a relatively in line CPI report, which came in flat on the month in August, after dropping 0.7% in July. The annual inflation rate dropped to 0.4% despite expectations for no change.
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