• USD: Higher, unemployment rate posts an unexpected decline, nonfarm payrolls below expectation
      • JPY: Lower, Toyotas CEO says the company is in crisis, risk recovers on better US employment report
      • EUR: Lower, concern about EU fiscal troubles
      • GBP: Lower, producer prices rise more than expected
      • CAD and AUD: AUD lower & CAD higher, Canada's unemployment rate drops jobs, growth rises by 43K

      Overview

      US January headline unemployment posted an unexpected decline to 9.7% from 10% last month and nonfarm payrolls dropped by 20k. The average workweek increased to 33.3 hours from 33.2. 8.4mln jobs have been lost since the start of the recession in December 2007 compared to the 7.2mln originally reported by the Labor Department. The number of long-term unemployed rose to 6.3mln. December nonfarm payrolls were revised to - 150k from -85k, October nonfarm payrolls revised to -224k from -127 and November nonfarm payrolls were revised up 64k from up 4k. The US economy continues to shed goods producing and construction jobs with jobs increasing in services and retail. Government hiring down slightly. The USD initially pared overseas gains and the JPY traded lower after the release of better than expected US headline unemployment. USD resumed its rally as US equities traded lower and the unemployment report failed to lift market gloom. Despite the drop in headline unemployment the US still shed 20,000 jobs last month and the data failed to boost risk appetite. Ahead of todays release of US January unemployment the USD traded higher with the EUR trading at an eight month low. USD is supported by a spike in risk aversion sparked by concern about debt troubles in Europe and worries about the global recovery. European credit default spreads continued to widen. Expanding EU budget deficits are seen as a threat to the European recovery. Recent tightening of lending conditions in China generates concern about the global recovery. Risk aversion is the major driving factor for the financial markets and Forex trade. Report of a sharp decline in German industrial output adds to negative sentiment towards the EUR. EUR down side was limited by report of SNB intervention. The SNB is rumored to have intervened as the EUR/CHF cross traded at a 15 month low. GBP traded lower with downside limited by report of higher than expectedproducer prices in January. Commodity currencies traded mixed pressured by the spike in risk aversion with CAD downside was limited by report of an unexpected drop in Canada's unemployment rate and stronger than expected jobs growth for Canada in January. The trade will continue to monitor the direction of equities to gauge risk sentiment with focus on EU response to the debt crisis.

      Today’s US data:

      January unemployment declined to 9.7%, a reading of 10.1% was expected. January nonfarm payrolls came in at -20k, a reading of 5k was expected.


      Upcoming US data:

      Next week’s US economic calendar includes the February 9th release of December  wholesale inventories and sales. Inventories are expected to rise by 0.5% and sales are expected to rise by 1%. On February 10th December trade balance and the Treasury budget will be released. The trade balance is expected at -36.5bln, compared to -36.4bln last month. The Treasury budget is expected at -60.5bln, compared to 63.5bln last  month.On February 11th initial jobless claims for week ending 02/06 will be released expected at 470k, compared to 480k last week. January retail sales and December business inventories will also be released on February 11th. The retail sales are expected to rise by 0.5%, compared to -0.3% last month. Inventories are expected unchanged at 0.4%. On February 12th February University Michigan consumer sentiment will be released expected at 74, compared to 74.4 last month. Initial jobless claims for week ending 01/30 rose by 8K to 480k, a reading of 465k was expected. Q4 Productivity rose by 6.2% and labor costs fell 4.4%. Labor costs were expected at -2% and productivity was expected 5%. December factory orders rose by 1%, a reading of 0.8% was expected.