A Poor Unemployment Report Does Not Weaken the Dollar

Overall: The dollar continued to advance even after the weekly report on unemployment indicated that the number of people who were continuing to claim benefits was 3,525,000, an increase of 122,000 and that the 4-week moving average of continuing claims was 3,429,000, an increase of 36,750. For the year, the number of people claiming benefits each week has averaged 3.019 million. "The number of people continuing to claim benefits is the highest since in nearly 5 years," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "At this point, it is likely that the weakening job market will have a negative effect on consumer spending going into the second half of the year, especially after the effects of the tax rebates wears off."

The Euro (Eur/Usd) broke below $1.40 for the first time since September 2007. The ECB released its bulletin during the European trading session. The bank sees inflation remaining well above the target range and is expecting the second and third quarter GDP releases to be weak.

The Pound (Gbp/Usd) is looking to finish flat, and the range was just 140 pips. MPC members testified before the Treasury today. In the U.K., inflation expectations have increased since the last quarter. The U.K. economy continues to be pressured by inflation. The Inflation Attitude report shows inflation is likely to remain high over the medium and long term.

The Aussie (Aud/Usd) declined on the day but finished about 100 pips above the daily low. The Employment Change in Australia was up 14.6 thousand in August versus analysts expectations of five thousand. Full time employment rose by 7500 and part time by 7200.The unemployment rate decreased 0.2 percent to 4.1 percent. The rate of male unemployment fell by 0.1 percent to 3.8 percent while female unemployment rate fell by 0.3 percent to 4.4 percent.

The Cad (Usd/Cad) rose, reaching its highest level since August 2007, as crude futures for October fell more than 1.5%. Statistics Canada said Canada's trade surplus declined as crude oil and other commodity prices declined during July. Commodities make up about half of Canada's exports. Crude futures fell about 11% during the month and the loonie has depreciated about 6% against the dollar from mid July. "U.S. demand for imported oil from Canada is declining," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "The Canadian dollar can be expected to weaken as demand for oil declines even though the Bank of Canada, who said its current rate is 'appropriately accommodative,' is likely to stay on hold for the time being."

The Swissy (Usd/Chf) rose nearly 70 pips as investors sent the S&P up by 0.32% by 15:00 EDT.

The Yen (Usd/Yen) declined 160 pips as S&P futures traded 1.4% lower in overnight trade. The pair rose 70 pips off the day's low after investors became encouraged by a CNBC report which said Lehman Brothers CEO Richard Fuld is shopping the firm to U.S. investment banks.

U.S. Session Wrap The DOW makes a 3% round trip

A continuing decline in the price of crude, along with a report which said Lehman Brothers CEO Richard Fuld is looking to sell the entire firm boosted stocks well off their lows and into positive territory. Hurricane Ike gathered strength in the Gulf of Mexico, but is being projected to travel on a path west of major oil installations. About 25% of production has been shut as a precaution.

At the close of floor trading on the NYSE, the DOW was on 11,437.70 after gaining 168.78 points (1.5%). The average had been down as much as 1.5% earlier in the day. The S&P closed on 1249.58, up 29.52 points (1.4%) while the NASDAQ finished trading on 2258.22 with a gain of 29.52 points (1.32%). Stronger-than-expected demand for the government's $12 billion auction allowed yields on 10-year Treasury notes to hold near the lowest level in nearly five months. Ten-year note yields declined 1 basis point to 3.62%. The two-year note's yield fell 2 basis points to 2.19%. The dollar continued its run against most major currencies, gaining 0.41% on the euro and 0.06% on the pound. The dollar fell 0.67% against the yen but was well off session lows.

In other news, despite an economy hobbled by the worst housing bust since The Great Depression and the loss of over 600k jobs this year advertisers have already bought about 85% of the commercial time in the 2009 Super Bowl, say media buyers and advertisers. The pace is actually faster than normal; typically just 50% to 60% of ads are sold at this time of the year. Advertisers are paying as much as $3 million for a 30 second ad, according to ad buyers

If the market's gyrations over the past year have given you a headache, there is some good news. Allergan said clinical trials on the effects of its Botox treatment on chronic migraines were positive and that the company will seek U.S. approval to market it for headaches. Botox is already approved for treating cervical dystonia, nerve and muscle spasms and excessive armpit sweating (which is something else we are fairly certain many market participants are suffering with). The trails have shown injections may also benefit adults suffering from headaches that occur at least 15 days a month, which is probably the average for anyone still working at a financial firm these days. Results showed that both the number of headache days and the number of episodes were reduced when patients were given Botox injections every 12 weeks compared to injections of a placebo.

Crude oil for October delivery fell $1.71 (1.6%) to settle at $100.87 a barrel after hitting a low on $100.10, the lowest since early April. Hurricane Ike is forecast to miss the offshore oil and natural-gas fields.

Gold futures for December delivery fell $17 (2.2%) to $745.50 an ounce as the dollar continued to advance. Gold has fallen 28% since March.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

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