Forex: Dollar May Be More Responsive to Strong vs Weak US Jobs Data

2014-03-07 05:40:00 Ilya Spivak, Head Strategist, APAC

Talking Points:

Major Currencies Quiet in Asia, Focus Now on US Employment Report
Persistent Disappointment is the Established Status Quo for US Releases
Dollar May See Disproportionate Response to Good vs. Bad Jobs Data

The major currencies are little changed in overnight trade as investors withhold directional conviction ahead of the much-anticipated US Employment report due in the hours ahead. Expectations call for nonfarm payrolls to rise 149,000 in February, marking the largest increase in three months. The unemployment rate is expected to print at 6.6 percent, unchanged from January.

US economic news-flow has increasingly underperformed relative to economists’ forecasts since mid-January but the Federal Reserve has stubbornly insisted that it intends to continue “tapering” QE asset purchases. This disconnect is likely to be at the heart of the markets’ reaction to whatever jobs figures ultimately come across the wires.In this context, data perceived as relatively “good” will support the Fed’s side of the argument and stands to boost the US Dollar, while an outcome seen as “bad” would likely weigh on the greenback.

The degree of follow-through is likewise an important consideration. Persistently disappointing news-flow over the past two months has likely established a sort of status-quo in the minds of traders. That means a payrolls number that falls short of median forecasts would amount to continuity of established trends. That means that while USD is likely to come under pressure in this scenario, the move’s staying power may prove limited. On the other hand, a better-than-expected or even a broadly in-line result would mark a change of pace and a comparative improvement, which may send the benchmark currency higher in a significant way.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
22:30	AUD	AiG Performance of Construction Index (FEB)	44.2	-	48.2
23:50	JPY	Official Reserve Assets ($) (FEB)	1288.2B	-	1277.1B
5:00	JPY	Coincident Index (JAN P)	114.8	114.6	112.3
5:00	JPY	Leading Index (JAN P)	112.2	112.4	111.7
5:30	AUD	Foreign Reserves (A$) (FEB)	51.8B	-	53.3B

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:45	CHF	Unemployment Rate (FEB)	3.5%	3.5%	Medium
6:45	CHF	Unemployment Rate s.a. (FEB)	3.2%	3.2%	Medium
8:00	CHF	Foreign Currency Reserves (FEB)	436.0B	437.7B	Low
8:15	CHF	Consumer Price Index (MoM) (FEB)	0.2%	-0.3%	Medium
8:15	CHF	Consumer Price Index (YoY) (FEB)	0.0%	0.1%	Medium
8:15	CHF	CPI - EU Harmonized (MoM) (FEB)	0.4%	-0.6%	Low
8:15	CHF	CPI - EU Harmonized (YoY) (FEB)	0.3%	0.2%	Low
9:30	GBP	BoE/GfK Inflation Next 12 Mths (FEB)	-	3.6%	Low
11:00	EUR	German Industrial Production (MoM) (JAN)	0.8%	-0.6%	Low
11:00	EUR	German Industrial Production (YoY) (JAN)	3.9%	2.6%	Low