Guarded optimism

4 minute read


In most respects Friday's US employment report was supportive of the USD. The economy delivered 196k new jobs in March, beating the expected 180k increase. Revisions to earlier months improved that picture further, with a net 30k more people in work than analysts had predicted. The wages picture was less compelling. Average hourly earnings increased by only 0.1% in the month, missing the forecast 0.3% rise. Annual earnings growth slowed from 3.4% to 3.2%.

The White House continued to express "guarded optimism" about trade talks with China. Advisor Larry Kudlow said the two sides are getting "closer and closer" and that there will be "a lot of teleconferencing" this week. On average, the USD was unchanged against the other major currencies.


The USD is exactly unchanged against the euro. On Friday the EUR fell back a little following the US employment report: this morning in the Far East and Europe it made back its losses. Over the whole period the EUR/USD exchange rate covered a range of less than a third of a cent. Compared with a month ago the EUR is just 0.3% firmer against the USD.

There were two contributors to the Euroland statistical picture this morning. Trade figures from Germany showed exports falling by a monthly 1.3% in February while imports fell 1.6%. Although the net result was wider surplus, the decline in trade on both sides of the equation was not an optimistic sign for the economy. A survey by Sentix found Euroland investors less pessimistic in April, with the score improving from -2.2 to -0.3.


The Loonie did better than the USD, strengthening by 0.2%. On Friday morning that did not look the most likely outcome, given the contrast between the US and Canadian employment data. Investors had reckoned on a 1k increase in Canadian jobs: they were presented with a 7.2k fall. Hourly earnings were up by 2.32% on the year.  

On their own, those numbers might have sent the CAD lower. But the Loonie was saved by oil prices, which began to head higher shortly after - and possibly because of - the US data. WTI crude went up by 2% on the day to a five-month high. 


Sterling took some flak on Friday for a perceived lack of progress on Brexit arrangements. Parliament's upper house had still not given its approval to the House of Commons' legislation that is supposed to prevent Britain leaving the EU with no post-Brexit arrangement in place. At the weekend investors were not filled with confidence when the leader of the Commons said on TV that leaving with no deal would be "not nearly as grim" as many believe.

But then Britain's latest YouTuber, Theresa May, shared a home movie. She sounded so reasonable that investors decided there was nothing to fear. The prime minister calmly explained that the choice is between leaving the EU with a deal or not leaving at all. Investors quite liked the sound of that. They could live with either.  


After two weeks of decline the JPY broke out of its channel last night. The move did not obviously coincide with any data or comments. It seemed to be a purely technical phenomenon that left the JPY 0.2% higher on the day against the USD.

That is not to say there were no data or comments. Japan reported an unexpected trade surplus in goods for the month of February and the Cabinet Office's Eco Watchers survey (outlook) was two and a quarter points lower on the month at 48.6. Bank of Japan governor made an anodyne speech in which he spoke of moderate economic expansion and gradually-rising inflation.

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