Aside from the hour after the US labor Department printed March non-farm payrolls, volatility was virtually non-existent amongst the majors. As for actual price action, the sharp dollar rally was able to push a few pairs into new territory and pulling others back within conservative ranges.
Against the euro, the greenback was able to push its way back below 1.34 on a 60-point drop before withdrawing to a 10-point congestion band. In similar fashion, USDCHF saw its own 65-point rally back to the range top that has held down spot since the middle of March at 1.2230. The long-term triple top in GBPUSD received further confirmation with todays dollar rally. The pair responded to the employment data with a 65-point tumble to a 1.9635-low. Finally falling back in line with the rest of the majors, USDJPY reported a move that ran a distance similar to the other majors. Since testing former resistance around 118.50 yesterday, the pair has found its way to 119.42.
When liquidity in the currency market is as thin as it was on Friday, it becomes very difficult to forecast the behavior of the already unpredictable dollar. This time around, those market participants still at their terminals had the unique opportunity to react to a surprising print from the market-moving non-farm payroll number. According to the Labor Department, employers took on 180,000 new workers nationwide last month, 50,000 more than the market consensus. Whats more, Februarys initial print of 97,000 was revised higher to 113,000 the 28th consecutive month in which revisions have been positive. Looking at the component data and various numbers for employment, it was easy to see the report was positive almost anyway you folded it. From the various sectors, the bulwark service group took on 137,000 new employees for the month, with a particularly impressive 36,000 added at retailers which was the biggest addition since July of 2005. Even the construction sector, which shed jobs on the slump in housing demand, added 56,000 people to the payroll as the weather improved from Februarys cold snap.
Even the periphery indicators supported joined the optimism boost. The unemployment rate, expected to grow slightly to 4.6 percent, actually dropped to 4.4 percent to match its five year low. Adding the other key ingredient to spending, average hourly earnings matched expectations on both the monthly and yearly scales with a 0.3 percent and 4.0 percent pace respectively. While these marked a modest cooling from the previous month, the level will likely still provoke consumer-led inflation. While the employment data was obviously the most highly anticipated for the day, the few indicators werent the only ones to hit the wires Friday. Wholesale sales and inventory numbers did not confirm the tepid pace of activity for retailers in February. Sales made by factories and distributors jumped 1.2 percent for the month as investors cooled from January with a 0.5 percent pick up. Together, these two numbers suggest demand may once more stoke production as stores look to keep their shelves fully stocked.
US equities were closed for the Easter holiday Friday. Carrying over Thursdays closes, the Dow is at 12,560.20, the S&P 500 resides a little over a percentage point away from retesting six-year highs at 1,443.76 and the NASDAQ Composite was quoted at 2,471.34. When liquidity and investors return to the market next week, there will be a few overwhelming themes to contemplate for direction. Fridays employment data may have a delayed effect on overall sales projections as it suggests Americans will continue to turn their incomes back into the market. Another issue to consider is the start of first quarter earnings season. The usually volatile few weeks will kick off with Dow-component Alcoa reporting its numbers for the first three months of the year.
Traders in the Treasuries market took advantage of the shortened session and thin liquidity to drive yields on the strong payroll number. At the 15:00 GMT close, the ten-year note was trading 17/32nds off the open at 99-01 as its yield tacked on 7 basis points to 4.749. At the same time, the thirty-year bond dropped 22/32nds to 97-11 while its yield grew 5 basis points to 4.920.