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Adam Solomon is a specialist in business foreign exchange issues at foreign exchange brokers TORfx.

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Home Opinion Opinion Dollar does not flinch on unemployment data

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Dollar does not flinch on unemployment data PDF Print E-mail
Written by Mark Deans at MoneyCorp   
Monday, 08 February 2010 11:43

This morning's Mark Deans column: No communiqué from G7 - But it still does not like volatility.



Good morning.

With one eye on boosting ice exports the Canadian finance minister hosted the weekend G7 ecofin meeting north of the Arctic Circle in Iqaluit, Nunavut.

Some people will know the place better by its old colonial name, Frobisher Bay.

A jolly programme of leisure diversions was available to delegates. Bank of England Governor Mervyn King and some colleagues went dog-sledding but not all the activities were so popular.

French finance minister Christine Lagarde quite rightly declined to take part in the moose wrestling and all the delegates made the excuse that they were too tired to go clubbing, even though their hosts had made hundreds of baby seals available.

As for the business part of the conference, investors were left to guess what the ministers had or had not agreed. There was talk of transaction taxes and other levies on banks.

They agreed to write off debts owed to them by Haiti and to continue with stimulus measures for their own economies. The European representatives assured America and Japan that they would make sure Greece sorted itself out.

With regard to currencies G7 had nothing to add to what it said after October's meeting in Istanbul ('too much volatility could hurt the global economy and the financial system'). But there was no communiqué. All the delegates agreed that full and frank discussions were more productive than agonising over a form of words to which all could agree.

There has been little currency reaction to the G7 meeting, hardly surprising when there was so little to which investors could react.

Nor was there much on Friday to the US employment report even though, on the face of it, non-farm payrolls provided ample excuse for the market to react.

The consensus called for an increase of +15k jobs in January. The actual figure was -20k and a negative revision took the December result down from -85k to -150k. In net terms, non-farm payrolls were 100k worse than expected and the US dollar did not flinch.

That lack of reaction suggests that investors remain preoccupied with the budget gaps of Club Med and the future of credit ratings there, in Britain, and elsewhere.

Despite all the public optimism that a double-dip recession is out of the question, the market mumbles to itself about the risk of just such an outcome. The US dollar and the Japanese yen are flaunting their safe-haven status and investors are lapping it up, playing the safety game and all but ignoring the fundamental economic data.

Those investors will be saved the effort of ignoring data today because there are none really worth bothering about. A 4.4% annual rise in New Zealand house prices was of momentary assistance to the Kiwi dollar but the market has been easily able to contain its enthusiasm. A slew of Japanese trade and money supply statistics had as little impact as usual. Swiss unemployment and retail sales will be of less consequence than an awareness that the Swiss National Bank is lurking behind a bush, ready to pounce on anyone who takes the franc too high. The only two announcements with any real potential - and not much at that - are the index of Euroland investor confidence and Canadian housing starts. Nothing on the list is obviously bad for sterling but that does not mean it has room for complacency.
Last Updated ( Monday, 08 February 2010 11:47 )
 

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