Risk Aversion Boosts Demand for the Dollar after Worse-Than-Expected Payroll Number

The dollar strengthened across the board as the worse-than-expected non-farm payroll number prompted traders to steer away from high-yields. The EurUsd continues its losing streak thanks to the dollar strength, dipped 160pips from yesterday’s high to 1.40 as downward momentum was represented by declining RSI. The GbpUsd fell 100pips and consolidated around 1.63, registered a three-day drop of 300pips or 2.4%. The UsdJpy slid 70pips to 96.1 as traders steered away from risk appetite. The worse-than-expected payroll number eroded near-term positive sentiment and weighed on equity markets, with the Dow plummeted 154ppts or 1.83% the FTSE down 96ppts or 2.22%. Yields are lower across the curve, with the 2yr yield slipped .04 to .99% and the 10yr down .04 to 3.4% due to the flight-to-safety play. Commodities tumbled across the board, with oil declined $2 or 3.48% to $66bbl and gold edged down by $10 or 1.12% to $930oz.

Risk aversion is on traders’ menu today. The dollar strengthened against majors as the payroll number dampened prospects for a recovery. ECB kept rates unchanged at 1% as forecasted. The euro extended its losses against the dollar after ECB President Jean-Claude Trichet said the euro-zone economy will remain weak until year end. Euro-zone unemployment touched a 10-year high of 9.5%, further boosted the euro selloff against the dollar. US non-farm payroll dropped 467k vs. 363k forecasted while the unemployment rate rose to 9.5% vs. 9.6% forecasted, sending 2yr yields lower to .99% after the data came out. Given these data, traders presaged a strong recovery is unlikely to emerge in the absence of sustainable growth.

AC Markets
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