by Korman Tam
The highly anticipated September labor report triggered a
whipsaw reaction in the currency market with the greenback
initially rallying sharply following the release. However,
upon further analysis of the data, the currency quickly
relinquished its gains to fall to fresh session-lows
against the euro at 1.4156 and sterling at 2.0442.
The headline non-farm payrolls figure for September was
higher than forecast, expanding by 110k compared with an
upwardly revised August payrolls at 89k (prev -4k). The
unemployment rate, however, crept up higher to 4.7% versus
4.6% from a month earlier – which is the highest level
since July 2006. Closer inspection of the report reveals
that the August revision was mainly seasonal reflecting
higher government employment, specifically in education.
The jobs report shifted market sentiment of upcoming Fed
policy, with US interest rate futures pricing in
approximately at 52% chance of a 25-basis point rate cut in
October, compared with a 72% chance prior to the release.
The labor report quelled recessionary fears and tempered
expectations for further aggressive easing from the FOMC.
Our medium term outlook is for a weaker dollar and view
this latest bounce higher to be short-lived. Next week's US
economic calendar is light on data, consisting of the
September Federal Budget, August trade balance, weekly
jobless claims, PPI, retail sales, business inventories and
the University of Michigan consumer sentiment.
EURUSD holds near its session highs, around 1.4140 with
initial resistance seen at 1.4180, followed by 1.42 and
1.4250. Support starts at 1.41, backed by 1.4030 and 1.40.
Source: Forexnews.com
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