A Yen For NFP

It is no surprise that in this market investors do not want to ‘diddle in the middle.’ Its a sure fire recipe to losing more mula. All week, these currencies have never really threatened to break out of their own particular range with gusto. They have either been held back by Central bank rhetoric, the ever ‘imminent’ Greek PSI announcement or Euro periphery funding issues. The battle scarred investor seems war weary and February has only just begun!

The main event today in North American is the non-farm payroll release. Indicators this week are leading up to an NFP print being somewhat mixed. The market is only concerned in how strong? This weeks ADP was on track, US weekly claims a tad stronger and pulling away from that +400k psychological mark, and yet the market expects a slightly left of center job print (+130 to +150k). Analysts are looking towards the temporary hiring and firing in the transportation sector to be of concern and the birth and death adjustment.

Ever since the BLS fully implemented the birth and death adjustment, Januarys NFP print have always surprised the market to the downside, with an average surprise greater than-50k (proven eight out of eight times since 2003). Obviously the headline print will not take this into account, thus on average the first market move tends to be the wrong move. Expect dealers to position themselves for an NFP disappointment by staying short USD/JPY. To date, the market is not threatened by Finance Ministers Azumi comments, they seem to favor backing a dovish helicopter Ben and company at least until there is a BoJ presence.

This morning, Eurozone retail sales fell for a second month in December, down -0.4% m/m and -1.6% y/y. So far the EUR has ignored this drop, instead preferring to push towards session highs and squeeze the weaker shorts out ahead of NFP. Retail sales is again strong proof that the EUR’s 17-nations are threatening to return to recession, if they are not already there. With Governments cutting spending and banks reducing lending, unemployment has continued to rise and wage growth remaining slow can only but reduce overall spending. In the 27-member European Union, sales rose +0.3%; largely due to a +0.4% rise in the UK and a +0.7% uptick in Poland.

Other Links:
China to Play the Eurozone’s White Knight?
Despite “Signs of Improvement” Bernanke Holds Near-Zero Rate Pledge

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