Payrolls Fail to Support USD Monday, September 11, 2006
The dollar finished the Friday session little changed from where it opened against the majors. Choppy trading saw the greenback initially stronger, climbing to session highs at 1.2757 versus the euro and 1.8959 against the sterling after this morning’s data release. However, the currency relinquished all of its gains by the New York afternoon after traders digested the news ahead of the long holiday weekend.
The headline report of the session was the much-anticipated US August jobs report. Heading into the data release, the dollar was bid across the board on the possibility of a sharply lower than forecast reading – thereby reinforcing the overall negative market sentiment surrounding the currency. The August non-farm payrolls was slightly better than consensus calls for an increase of 125k, improving to 128k from 113k a month earlier. The unemployment rate was inline with estimates, drifting lower to 4.7% for the month and improving from 4.8% previously. Average hourly earnings however, declined by more than expected to 0.1% and shy of calls for 0.3% and down from 0.4% from July. Manufacturing ISM for August also fell short of forecasts, declining to 54.5 from 54.7 a month earlier and missing calls for an improvement to 55.0. Meanwhile, the University of Michigan consumer confidence survey improved to 82, larger than the 79.2 estimates and up from last month at 79.7.
The initial reaction higher in the greenback can be attributed to markets positioning for disappointing figures, but once that scenario did not materialize traders began short covering ahead of the holiday weekend. The sharp gains in the dollar were short-lived as the currency quickly relinquished its strength to fall back to where it opened. We anticipate selling in the dollar to begin in earnest as summer trading subsides.
The headline report of the session was the much-anticipated US August jobs report. Heading into the data release, the dollar was bid across the board on the possibility of a sharply lower than forecast reading – thereby reinforcing the overall negative market sentiment surrounding the currency. The August non-farm payrolls was slightly better than consensus calls for an increase of 125k, improving to 128k from 113k a month earlier. The unemployment rate was inline with estimates, drifting lower to 4.7% for the month and improving from 4.8% previously. Average hourly earnings however, declined by more than expected to 0.1% and shy of calls for 0.3% and down from 0.4% from July. Manufacturing ISM for August also fell short of forecasts, declining to 54.5 from 54.7 a month earlier and missing calls for an improvement to 55.0. Meanwhile, the University of Michigan consumer confidence survey improved to 82, larger than the 79.2 estimates and up from last month at 79.7.
The initial reaction higher in the greenback can be attributed to markets positioning for disappointing figures, but once that scenario did not materialize traders began short covering ahead of the holiday weekend. The sharp gains in the dollar were short-lived as the currency quickly relinquished its strength to fall back to where it opened. We anticipate selling in the dollar to begin in earnest as summer trading subsides.
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