Confined Dollar Movement Ahead of U.S. Jobs Report

March 5, 2010

The dollar is narrowly mixed with gains of 0.3% against the yen, no change versus sterling and the Swiss franc, and declines of 0.5% relative to the kiwi, 0.3% against the Australian dollar and 0.1% versus the euro and Canadian dollar.

Stocks rose 1.4% in India, 0.7% in China and Australia, 0.5% in New Zealand and South Korea, 0.4% in Taiwan and 0.3% in Thailand.  But in Europe, the Dax, Cac40 and Ftse have each edged 0.1% lower.

Ten-year JGB and gilt yields softened two basis points, whereas their German counterpart firmed by a single basis point.

Oil and gold prices advanced 0.7% and 0.2% to $80.75 per barrel and $1135.50 per troy ounce.

The consensus forecast for U.S. non-farm payroll employment in February, due at 13:30 GMT, is a drop of about 30K, similar to January’s initially reported 20K decline.  However, due to weather distortions, markets are braced for a wide range of possibilities.  Anything between a gain of 10K or a decline of 125K may not evoke a strong reaction and be dismissed as adding nothing substantive to what is already known.  The jobless rate is seen firming back a tenth to 9.8%.

Meantime, Germany just reported a much stronger-than-anticipated 4.3% jump in industrial orders during January, following December’s 1.6% disappointing drop.  That put orders 4.1% above the fourth-quarter average level and 19.6% greater than in January 2009.  Orders for intermediate and capital goods soared by 6.0% and 3.7%, while those for consumer goods only increased 0.4%.  Domestic orders jumped 7.1%, including a 10.0% advance in those for capital goods, which are a pretty good leading indicator for business investment.

A slightly softer yen this morning reflects continuing speculation that the Bank of Japan may be planning more measures to counter deflation and that the six-year hiatus on Ministry of Finance intervention may end soon.

Chinese Prime Minister Wen gave his state of the union address, projecting growth this year of 8% with inflation of 3% but mentioning no reversal of last year’s massive infusion of liquidity.  However, he indicated that continuing property market speculation will not be tolerated.

Canada’s Conservative government late yesterday delivered a restrictive budget that would cut the deficit next fiscal year by 8.6% and put government finances on course to return to surplus sooner than any other Group of Seven country.  This will be done mostly through spending restraint.

British producer output prices rose 0.3% on month and 4.1% from February 2009, the biggest on-year gain in 14 months.  The 12-month pace had been merely 0.4% as recently as September.  Core PPI-O was at 2.9%.  Producer input prices only firmed 0.1%, cutting their 12-month rate of increase to 6.9% from 7.7% in January.

Spanish industrial output fell 4.6% in the year to January. Danish industrial production and orders posted an on-year rise of 3.7% and drop of 6.8%, respectively, in January.  Norwegian industrial production climbed 0.3% on month but fell 3.1% on year in January.  Icelandic GDP returned to the black last quarter with growth of 3.3% from 3Q09 but posted a deeper on-year drop of 9.1%.

Consumer prices in the Philippines and Taiwan recorded 12-month increases in February of 4.2% and 2.4%, respectively.  Malaysia’s trade surplus widened 6.6% in January from December, and exports were 37% greater than in January 2009.  Taiwanese wholesale price inflation of 5.9% in February was about three times greater than assumed.

A corporate survey in Australia found about seven-eighths of them profitable in the first half of the current fiscal year.

Confidence in an internal rescue package for Greece continues to build.  One ECB Governing Council member called the Greek government’s austerity proposals serious.

U.S. consumer credit data will also be released today, but the labor report is the dominant focus.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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