Surprise surprise

Surprise win

A turgid drama came to its end last night after four hours of tedious television. But at least it was enlivened by entertaining advertisements, unlike BBC's War and Peace. Denver's victory in the Super Bowl was as unexpected as the dollar's win on Friday.

The US employment report, that most eagerly-awaited of ecostats, showed unemployment falling to an eight-year low of 4.9% as 151k people were added to nonfarm payrolls in January. The 151k number was below the expected 190k and adjustments to earlier months left a net shortfall of 41k compared with analysts' forecasts. But the lower unemployment rate carried the day for the dollar.

It shared the lead with the Swiss franc, strengthening by 0.3%, nearly half a cent, against sterling and by a little more than that against the euro. The outcome has left investors scratching their heads. Until Friday morning the fashionable view was that slowing growth in the American economy had derailed the Federal Reserve's push for higher interest rates. At best, the dollar was in the doldrums; at worst it was a sell. The unexpectedly robust employment report has called that idea into question.

Surprise loss

The dollar rally was matched by an offloading of the "risky" currencies which had been expected to benefit from a prolongation of low US interest rates. The Australian dollar was Friday's worst performer, falling by -1%, and the Canadian dollar was not far ahead of it. 

Commodity-related currencies all took a hit from the US jobs report. The Aussie was hurt more than the others, probably as a result of figures earlier of Friday which showed Australian retail sales to be flat in December. A guardedly upbeat economic assessment from the Reserve Bank of Australia was overshadowed by the retail sales data, which came out at the same time.

In another coincidence of timing a disappointing loss of 6k Canadian jobs, which took unemployment up to a three-year high of 7.2%, was partially offset by news of increased international trade and a narrower trade deficit. The Loonie suffered a net loss of one and a half cents - 0.8% - against sterling while the NZ dollar, which stayed out of the headlines, was down by just 0.5%.

Kong hi fah choi

The dawn of the Chinese year of the monkey made for a quiet start to the day in the Far East. A thinly-populated agenda points to more of the same during the London session. 

Economists are taking a close interest in China's foreign exchange reserves, which have been eroded to a three-year low by the authorities' efforts to prop up the yuan. An outflow of capital has put the currency under pressure: the unanswered question is whether that exodus is the result of foreign currency loan repayments (good) or capital flight (bad).

There are no economic data of any consequence today. Euroland reports on investor confidence, South Africa on manufacturing production and Canada on housing starts and building permits.