Weak Jobs Data Shakes The dollar
The US Labour Department reported non-farm payrolls fell by 63k in February, the largest drop since March 2003
The dollar continued its fall against the euro and hit eight year lows versus the yen, after weaker than expected non-farm payrolls heightened concern the US economy may have fallen into a recession. Traders have begun speculating the Federal Reserve will need to lower borrowing rates by 75 basis points.
The US Labour Department reported non-farm payrolls fell by 63k in February, the largest drop since March 2003. The employment data fell far short of the 25k new jobs expected to be added. Job losses were widespread. Some 52k jobs were lost at factories, the largest decline since July 2003 when 92k jobs were cut.
US unemployment rate fell to 4.8% from 4.9%, versus forecasts for a rise to 5%. But the drop was result of less people being in the workforce. Average hourly earnings, the report’s inflation component, rose 0.3% as expected.
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Dollar yen was last seen trading 102.21 8:32GMT. ‘The Fed will be forced to lower rates down to 2 percent amid the slowing economy,’ said Yuji Saito, head of foreign- exchange sales in Tokyo at Societe Generale SA, France’s second- largest bank by market value. ‘I expect the dollar to fall below 100 yen this week.’ Technical analysis shows cover a bounce near 101.85.
The U.S. currency fell to $2.0175 against the pound, the lowest since December 18th and continues to trade near its highs of $2.0173 at 8:49 GMT. The dollar slid to 102.06 yen, the lowest in eight years. Against the Swiss franc, it was at 1.0220 from 1.0236 and continues to trade at record lows this morning.
Ahead today, we expect a stronger PPI for the UK. This figure should continue to strengthen the sterling against the dollar. But the market will be focused on ECB president Trichet’s speech at 12:00GMT and how he addresses inflationary pressures for the Eurozone.
Economic Calendar
| Time | Country | Event | Period | Previous | Forecast | Significance |
| 14:00 | Wholesale Inventories m/m | USD | Jan | 1.1% | 0.4% | ** |
| 12:15 | Housing Starts | CAD | Feb | 222.7K | ** | |
| 09:30 | Sentix Index | EUR | Mar | 4.3 | ** | |
| 09:30 | Industrial Production m/m | GBP | -0.1% | 0.1% | *** | |
| 09:30 | PPI Input m/m | GBP | Feb | 2.6% | 1.5% | *** |
| 09:30 | Manufacturing Production m/m | GBP | Jan | -0.2% | 20.0% | *** |
| 09:30 | PPI Output m/m | GBP | Feb | 1.0% | ** | |
| 09:00 | Industrial Production m/m | EUR | Jan | -0.5% | 0.4% | ** |
| 07:45 | Industrial Production m/m | EUR | Jan | 0.7% | 0.2% | ** |
| 07:45 | Trade Balance | EUR | Jan | -4.28b | -4.0b | ** |
| 07:00 | Trade Balance | EUR | Jan | 15.6b | 16.4b | ** |
| 05:00 | Economic Watch | JPY | Feb | 31.8 | ** |
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