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Euro Tanks, U.S. Dollar Surges on Nonfarm Payrolls, Greek PSI Deal

By , Currency Strategist
09 March 2012 14:45 GMT

Fundamental Headlines

- Payrolls in U.S. Climb above 227,000; Jobless Rate Holds at 8.3% – Bloomberg

- Trade Deficit in U.S. Widens to Largest Since October 2008 – Bloomberg

- OPEC Pumps Record Volumes Despite Demand Worries – Reuters

- China Data Show Slowdown – WSJ

- Greece Passes Key Debt Test – WSJ

European Session Summary

Higher yielding currencies and risk-correlated assets took another step backwards in the overnight, although it was the European currencies that ultimately led the turn lower against the U.S. Dollar. A stream of poor economic data out of Asia and the Oceanic regions weighed on high beta currencies such as the Australian Dollar, while the Greek debt-swap negotiations hurt the Euro. The final boost to the world’s reserve currency came following the strong nonfarm payrolls report for the United States at 13:30 GMT.

In regards to the Greek debt-swap deal, approximately 80 percent of Greece’s private sector creditors agreed to swap their bonds late-Thursday. With such a high rate of participation, the Greek government announced that it would trigger the collective action clauses (CACs) that would bring participation up to 96 percent. The big decision comes after the International Swaps and Derivatives Association meets in London today, in which they are expected to determine whether or not the debt deal can be qualified as a credit event, in which case the CDS will be triggered.

Looking at data ahead of the U.S. cash equity open, the February nonfarm payrolls report was better than expected, with 227K jobs coming to the economy versus 210K forecasted. According to a Bloomberg News survey, the January jobs report was revised higher to 284K from 257K. Meanwhile, the unemployment rate held steady at 8.3 percent. The February labor market reading tallies the third consecutive month of at least 220K job growth or better. The U.S. Dollar firmed across the board following the reading as another positive labor market reading reduces the necessity for further stimulus from the Federal Reserve.

EURUSD 5-min Chart: March 9, 2012

Euro_Tanks_U.S._Dollar_Surges_on_Nonfarm_Payrolls_Greek_PSI_Deal1__body_Picture_10.png, Euro Tanks, U.S. Dollar Surges on Nonfarm Payrolls, Greek PSI Deal

Charts Created using Marketscope – Prepared by Christopher Vecchio

Overall, the Canadian Dollar was the top performer following the labor report, up 0.09 percent against the U.S. Dollar. Such a reaction comes as no surprise, given the relationship between the Canadian and U.S. economies; as the United States’ largest trading partner, positive data out of the United States often serves as a catalyst for a stronger Canadian Dollar. Elsewhere, following the labor market reading and the Greek debt deal, the Euro was the worst performer, depreciating by 1.08 percent against the U.S. Dollar. The highly-correlated Swiss Franc was down 1.07 percent itself. If the CDS on Greek debt are not triggered, the Euro could rebound substantially; short Euro positions should be monitored carefully.

24-Hour Price Action

Euro_Tanks_U.S._Dollar_Surges_on_Nonfarm_Payrolls_Greek_PSI_Deal1__body_Picture_1.png, Euro Tanks, U.S. Dollar Surges on Nonfarm Payrolls, Greek PSI DealEuro_Tanks_U.S._Dollar_Surges_on_Nonfarm_Payrolls_Greek_PSI_Deal1__body_Picture_7.png, Euro Tanks, U.S. Dollar Surges on Nonfarm Payrolls, Greek PSI Deal

Key Levels: 13:55 GMT

Euro_Tanks_U.S._Dollar_Surges_on_Nonfarm_Payrolls_Greek_PSI_Deal1__body_Picture_4.png, Euro Tanks, U.S. Dollar Surges on Nonfarm Payrolls, Greek PSI Deal

Thus far, on Friday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is trading higher, at 9968.19 at the time this report was written, after opening at 9890.65. The index has traded mostly higher, with the high at 9968.77 and the low at 9888.38.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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09 March 2012 14:45 GMT