US Dollar: Delayed Reaction to Non-Farm Payrolls?

The US dollar was firmer across the board today as foreign exchange traders from around the world finally react to Friday?s stronger than expected non-farm payrolls report. The biggest percentage gain was seen against the Euro which has fallen back towards 1.40 while the high yielding New Zealand dollar was the only currency that managed to rise against the greenback.

With the bond markets closed for Columbus Day, there were no US economic releases on the calendar. Unsurprisingly, trading has been quiet as the market looks ahead to a potentially dollar positive week. We start tomorrow off with the minutes from the most recent Federal Reserve monetary policy meeting where the central bank lowered interest rates by 50bp. We will be looking to see whether the Federal Reserve took a preemptive move to avoid having to make successive ones or because they have no choice than to do so given the severity of the deterioration in the US economic condition. If it is the former, then expect the dollar to rally. If it is the latter, then expect it to fall. Towards the end of the week, our focus will turn to trade, inflation and consumer spending. The weakness of the US dollar should help to narrow the trade deficit while boosting inflation. Consumer spending is the wildcard as well as the biggest potential market mover this week (it is not due out until Friday). The strength of payrolls in September and the upward revision to retail sales in August suggest that retail sales could be stronger than the market is currently expecting.

US stocks are lower today. The Dow Jones Industrial Average is down 34 points at the time of publication. The drop in oil prices pushed the stocks of miners and oil producers lower. This is the first day in 3 that stocks have sold off. Certain tech stocks are doing well. Google Inc. for example broke above the psychologically important $600 mark to hit an intraday high of 603.95.

By Kathy Lien, Chief Strategist of