Dollar Advance Stalls As NFP Optimism Cools

Proving its weighty influence on the dollar fully two days ahead its release, speculation over Friday’s non farm payrolls depressed greenback as a couple of second-tier employment numbers cut into bullish convictions with disappointing prints.

By mid-day trade in New York, EURUSD had already put a floor in around 1.3560 before rebounding 50 points to meet yesterday’s close. For USDCHF, the dollar run didn’t end before the pair tagged a new three-week high at 1.2190. After marking the level though, the pair promptly retraced 75 points to seek out support. Acting as a barometer for the carry trade, USDJPY was finally cleared solid resistance in the overnight. After overtaking 120 though, the Japanese yen pushed back for a 70-point drop before pulling right back up to its new highs. Finally, the stall in the greenback helped curb a precipitous, overnight fall in the British pound. From yesterday’s US session fix, GBPUSD had reached all the way down for a 130 point loss before bouncing back above 1.99.
Yesterday’s ISM manufacturing report had more follow through than most dollar bears were expecting. However, the bullish sentiment couldn’t last forever - especially not in the face of another wave of economic releases. The end of the dollar’s steady advance could be traced back to this morning’s employment data. Though the Challenger and ADP reports released this morning have diverged considerable from the later-released NFP numbers in the past and are inherently second-class due to their proprietary nature, they still play a big part in coloring projections for Friday’s Labor Department numbers. The Challenger Job Cuts indicator reported an 18.4 percent increase in announcements from April 2006 last month. From the survey’s breakdown, the leading industry for firings was the financial sector by a large margin. Led by a Citigroup’s plans to trim 17,000 people from the firms payrolls, a total of 33,789 positions were cut last month. The sometimes unreliable ADP report further muddled the outlook for Friday’s report. Economists assigned a 100,000 consensus to the private payrolls indicator - the same as the NFP’s outlook - so when the ADP number printed a 64,000-person increase to its nationwide payrolls, it clearly boded poorly for the coming data. Officially, the April reading was the lowest in nearly four years; but realistically it wasn’t much lower than the dips in previous months.
Turning away from the employment data, the market was also given an update on the dubious housing and manufacturing sectors. Housing numbers were updated through the MBA mortgage applications for the week ending April 27th. While the overall sector is clearly still hurting, the leading home loan report is providing for the argument that a bottom could still be found soon. Applications rose for the second week in a row followed by the longest period of declines in years. Even more promising from the component numbers, mortgages for purchases actually hit a three year high despite stiffer regulations. For the manufacturing sector, March factory orders was a lagging support to yesterday’s ISM survey. Bookings grew the most in a year at 3.1 percent, suggesting corporate spending is on the rebound after a period of cost cutting and inventory reduction.
Equities shot higher on the open Wednesday morning as earnings and deal announcements carried the benchmark indices towards record highs. The NASDAQ was pacing the crowd with a sizable 0.86 percent rally to 2,553.19 by 16:00 GMT. Elsewhere, the S&P 500 was just below the psychological 1,500 level even after gaining 0.6 percent while the Dow pushed to new record highs on a 0.52 percent run to 13,204.72. From the ranks of the top movers list, restaurant franchise Chipotle Mexican Grill was pulling down a top spot. Shares of Chipotle rallied 16.1 percent or $10.64 to $74.90 after reporting earnings that beat the Street’s official consensus. In other news, as politicos and analysts weigh in on Rupert Murdoch’s bid for the Wall Street Journal, a bid for Cablevision systems joined the media fray. The wealthy Dolan family was reportedly offering $10.5 billion for the media firm which helped push Cablevision’s shares 8 percent higher to $35.28.
Traders in the electronic treasuries market reserved their labor trend positions for Friday’s key NFP report. By 16:00 GMT, the benchmark T-Note was only 1/32nds off its open at 99-27 as its yield grew a basis point to 4.642. Longer-termed bonds slipped 2/32nds to 98-28 as its yields edged a basis point higher to 4.820.