While the slew of sluggish economic data has caused traders
to scale back bets on how much longer U.S. rates would need to
stay in restrictive territory, it has simultaneously reignited
concerns about the risk of recession.
Economists polled by Reuters expect non-farm payrolls to
have grown by 239,000 in March, following February's 311,000
gain. The NFP number has been far more prone to delivering
upside surprises than misses in the last year or two.
For markets, this could make for a highly volatile session.
Michael Brown, a markets strategist at TraderX, said NFPs
had beaten expectations 11 months in a row - the longest
unbroken stretch of positive surprises in several decades.
"That's got to end at some point. It's almost ironic for it
to come to an end on Good Friday, when liquidity is horrible and
no one is trading the markets," he said.
"If we get a miss, I think it’s too soon for anything to
change for policy again in May - they’re not going to over react
to one jobs print. But in terms of trading it all, or expecting
a logical market reaction to it, we're going to get absolute
pandemonium whatever happens, there is not going to be the
volume in the market," he said.
"STEER CLEAR" The U.S. dollar index , which hit a two-month low this week, thanks in part to a drop in Treasury yields, was flat at 101.94. A non-farm payrolls miss might beef up the dollar's appeal as a safe haven, TraderX's Brown said. "Arguably, if we get a miss you probably want to buy the dollar, the yen rallies a bit. Treasuries would rally hard as that's the only thing that is actually open. 'Steer clear' is really the message from the market side of things," he said.
The Japanese yen , which has also some support from safe haven bids, was last flat on the day at 131.25 per dollar. Meanwhile, the risk-sensitive Australian and New Zealand dollars slid 0.34% and 0.5%, respectively. "The key to FX is going to be that interplay between what the what the U.S. economy numbers dish up as far as interest rates and sentiment about Fed policy," said Ray Attrill, head of FX strategy at National Australia Bank. In other currencies, sterling was roughly steady on the day at $1.246, while the euro eased 0.1% to $1.09. The dour economic signs have strengthened the view that the Fed will reverse course on rate increases, with traders hoping for more insight when Federal Reserve Bank of St. Louis President James Bullard speaks later on Thursday. Cleveland Fed President Loretta Mester, a known hawk, said in an interview with Bloomberg TV on Wednesday that it was too early to know if the Fed would need to raise its benchmark rate at its next policy meeting in early May. U.S. rate futures markets are currently pricing in a roughly even chance of the Fed leaving rates unchanged at its next meeting, with rate cuts being priced in as early as July and through to the end of the year. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates Surprise me ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Rocky Swift in Tokyo and Rae Wee in Singapore; Editing by Edwina Gibbs, Jamie Freed and Christina Fincher)
