Pressure was clearly building into Friday mornings payroll report, and traders were not going to pass up the opportunity to buy on leveraged volatility even if the numbers were largely in line with modest expectations.
Price action since Thursdays New York close showed a clear dollar bid, though momentum behind the move was waning as time wore on. After the fundamental fireworks, EURUSD dropped 75 points to 1.3085 though the now-frequent support level curbed further declines. A sharp rally in USDCHF through 1.23 took the pair all the way up to 1.3055, with few levels looking to block further moves when volatility returns. Holding to its surprisingly tight range, the post NFP reaction wasnt able to even reach the standard floor seen around 1.9275. Finally, the return of carry trade flows allowed the dollar to rally an impressive 100 points against the Japanese yen, leaving the pair well above 118.
After all the preparation and speculation, the employment data proved to be rather unimpressive. Officially, the market consensus leading into the February payroll report was pegged at 95,000. However, after market participants processed the weak jobless claim numbers from the government and the disappointing private payroll figure from ADP, expectations were riding somewhat lower than what economists were prepared for. When 13:30 GMT rolled around, a 97,000 print vindicated those contributing to the consensus, but left lowballers buying dollars. For the shock-factor, the prize went to the revision in Januarys report which was lifted from 111,000 to 146,000 not a big shift in a historical sense. Moving beyond the implications for short-term traders, the addition to employment is consistent with the stable growth central bank officials have pointed to for months. Whats more, the rest of the Department of Labors numbers were equally as promising. The jobless rate contracted for the first time in four months to 4.5 percent to leave it only slightly off of the multi-year low 4.4 percent. Whats more, earnings rose 0.4 percent for the month to leave the annual pace at a lofty 4.1 percent clip.
Though the employment numbers triggered the dollar move, traders quickly looked to the days other reports to add some fuel to the modest momentum. A distant second to the NFPs, the trade balance was also frustrating volatility traders. In January, the long-standing deficit shrank from $61.5 billion to $59.1 billion. Compared to the $59.8 consensus, this wasnt exactly unexpected. Breaking the trade numbers down, exports rose 1.1 percent to a record $127 billion, though the flash points like auto shipments and the Chinese account both worsened. Elsewhere, the wholesale numbers came well under the radar. Inventories grew 0.7 percent while sales dropped 0.9 percent led by an 11.1 percent hit in petroleum and 4.3 percent contraction in vehicles. While this data is for January, since it is upstream, it may hold some influence on Mondays retail report.
The major stock indices were awash in green, though they were well off of morning highs by lunch time in New York. The S&P 500 held a slight lead in the pack with a 0.26 percent advance to 1,405.49 by 17:10 GMT. The Dow was trading 0.23 percent higher at 12,288.66 while the NASDAQ Composite added 0.19 percent to 2,392.19 by the same time. Amid the slow advance, a few leaders were stealing the headlines. Yahoo shares dropped 5.3 percent to $29.68 as investors took an announcement that a scale back in the partnership with AT&T would lead to a millions in revenue losses. In earnings news, National Semiconductor reported a drop in third quarter, year over year profits, though a promising fourth quarter sales forecast led shares 3.3 percent or $0.84 higher to $26.12.
Treasury yields traced out a considerable run after the employment report, suggesting traders were pushing back their forecast for an eventual cut in the Fed Funds rate. By 17:10 GMT, the T-Note slipped 18/32nds to 100-10 while a 7 basis point addition brought yields to 4.585. Thirty-year bonds dropped 1- 1/32nds to 100-16 as yields dropped 6 basis points to 4.718.