The US dollar traded quietly today ahead of Friday’s non-farm payrolls report. Although the Australian and New Zealand dollars continued to appreciate against the greenback, the Euro and British pound held onto its gains. The Japanese Yen and Canadian dollar lost ground. This mixed price reflects a lack of clarity on how non-farm payrolls will fare tomorrow. On the one hand the ADP employment survey points to a strong release, but jobless claims rose by the largest amount since Hurricane Katrina.
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More specifically, jobless claims rose from 306k to 375k while continuing claims increased from 2669K to 2716K. Help wanted ads rose in the month of December, which is encouraging, but not enough to help the dollar recover. Personal income and personal spending beat expectations, but the Chicago PMI dropped more than expected. Tomorrow, the market is looking for a 70k rise in non-farm payrolls compared to the abysmal 18k job growth that we saw in the month of December. In addition to NFP, we are also expecting the final numbers for the University of Michigan consumer confidence index, construction spending and manufacturing ISM. Given the sharp drop in Chicago PMI, there is a strong chance that ISM will fall deeper into contractionary territory.
The Dow Jones Industrial Average is finally reacting to lower interest rates by posting a 207.53 point gain in today’s session, with 28 of the 30 components gaining, led by Home Depot Inc, and American Express Co. MBIA was also a main driving factor for the gains as they assured the public that the company had enough cash to ride out the credit crisis, and gained 11 percent. The broader S&P500 also shared on the gains as it posted a 22.74 point rise, but reported that January was the worst performing month since 1990.
US Treasuries prices were also topsy-turvy in today’s session as bond prices soared during the morning hours as a result of the disappointing jobless claims report but they quickly retraced back and fell lower as yields were up by the end of the day. Ten year bond yields fell 8bp to 3.595 percent.