Currency Markets at Risk of Sharp Volatility Burst on US Jobs Data

Talking Points

• US Jobs Report May Generate Burst of Volatility on Disappointing Print
• Major Currencies Little Changed vs. US Dollar in Quiet Overnight Trade

Currency markets were little changed in overnight trade as a lackluster economic calendar and thin liquidity conditions left the majors to drift in narrow ranges. Australian and Hong Kong bourses remained closed for the Good Friday holiday. Europe and the North American equity will likewise remain shuttered into the week-end, making for a potentially choppy environment as the closely-watched US Employment report comes across the wires.

Expectations suggest the world’s top economy added 205,000 jobs in March, making for the best quarter of employment growth since the first three months of 2006. A print in line with expectations is unlikely to prove meaningfully surprising and so ought to pass with little fanfare. Indeed, economists’ forecasts for 2012 US unemployment continued to slide in March having topped out in early November.

By contrast, a disappointing outcome may stoke an aggressive burst of volatility. While most exchanges will be closed, trading in equity and interest rate futures will be open until 1:15 GMT and 15:15 GMT respectively. This will give investors a very narrow window of opportunity to adjust their portfolios and establish hedges in highly illiquid market conditions, which could make for a breakneck burst of volatility that spills over into FX price action.

Asia Session: What Happened

Euro Session: What to Expect

Critical Levels

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com