The US dollar ended the day mostly lower, while the Japanese yen was the weakest of the majors, as investors generally shrugged off US economic data. Indeed, the release of US non-farm payrolls (NFPs) was not entirely surprising, as the report showed that the US economy lost 663,000 jobs in March, which was right in line with forecasts for a drop of 660,000. Furthermore, the unemployment rose in line with expectations to a 25-year high of 8.5 percent from 8.1 percent. That said, this data is still resoundingly weak, but the lack of market reaction suggests that the US recession and hefty job losses are already priced in. Meanwhile, the Institute for Supply Management’s gauge of conditions in the non-manufacturing sector unexpectedly fell during the month of March to 40.8 from 41.6. While the business activity component rose to 44.1 from 40.2, many of the other key indices, including new orders, employment, and new export orders all fell further. Even worse, almost every component held below 50, signaling that the contraction in growth in the sector is only accelerating.
Looking ahead to next week, which will be shortened by the April 10 market holiday, there is only one big piece of event risk for the US dollar: the Federal Open Market Committee (FOMC) meeting minutes. In March, the FOMC left the fed funds target range at 0.0 percent - 0.25 percent but the big surprise was that they officially announced quantitative easing efforts. Since this information has already been revealed, the release of the minutes may not be very market-moving, but they will likely add to indications that the FOMC will leave the target unchanged throughout much of 2009 and that they will continue to use the central bank’s balance sheet in an effort to improve credit conditions. The one thing that may capture the market’s attention is the FOMC’s long-run projections for growth, unemployment, and inflation as revisions that indicate that the outlook appears to be even worse than previously anticipated could hurt risk appetite throughout the financial markets, and thus lift safe-haven currencies like the US dollar. However, if the revisions go unchanged, traders may shrug-off this once critical release.
[B]Related Article:[/B] Non-Farm Payrolls Fell By 663K. Unemployment Rate Rises to 8.5%
[B]Check out the [/B][B]Daily Fundamentals in its entirety[/B][B] for a look at what happened throughout the FX markets today.[/B]